The FCA delivered a presentation outlining the key points of the directive at the Financial Services Expo earlier this week.
Due to the comprehensive regulation in place in the UK the directive will largely affect lenders, but brokers will be forced to make additional declarations under the new rules.
As Mortgage Solutions reported on Wednesday, brokers will be forced to provide details of all proc fees they could be paid if asked by consumers.
Under the new rules intermediaries must provide:
– The identity and geographical address of the intermediary
– The register in which he/she is included, the registration number and means of verifying registration
– Whether the intermediary is tied to or works exclusively for one or more creditors
– Whether the intermediary offers advice
– The fee or the method for calculating the fee
– Information about internal complaints procedures and external redress procedures
– Any commissions or other inducements payable by the creditor or third parties to the intermediary
Any mortgage offers made by lenders will become legally binding meaning that unless fraudulent activity is discovered, a mortgage offer cannot subsequently be withdrawn. It is thought this will result in lenders demanding more information from brokers and could slow down the mortgage application process.
Consumers will also be allowed a seven day cooling off period either immediately before or after the contract any mortgage contract is signed.
Lenders will also be forced to display a ‘worst case’ APR on all mortgage literature, highlighting the highest rate the mortgage has been in the past two decades. It is still unknown how this will affect lenders who have been active in the market for less than 20 years.
Information must be displayed in any advertising which shows:
– The identity of the creditor, intermediary or appointed rep;
– That the credit agreement will be secured by a mortgage
– The borrowing rate, indicating whether fixed or variable together with particulars of any charges included in the total cost of the credit
– The total amount of credit
– The APRC (Annual Percentage Rate of Credit)
– The duration of the credit agreements
– The amount of the instalments
– The total amount payable by the consumer
– The number of instalments
– A warning about fluctuations in exchange rates, if applicable
The FCA is planning a consultation on the implementation of the directive and the UK will be allowed a grace period before replacing the Key Facts Illustration with the European Standardised Information Sheet.
General information provided during each mortgage sale includes:
– The identity and geographical address of the information provider
– The purposes for which the credit may be used
– The forms of security taken – including if on property in another country
– The possible duration of the credit agreements
– The types of available borrowing rate – e.g. fixed or variable
– The implications for the consumer where foreign currency lending is offered
– A representative example of the total amount of credit, the total cost of credit for the consumer, the total amount payable by the consumer and the APRC
– An indication of possible further costs, not included in the total cost of a credit
– The range of different options available for repaying the credit (including the number, frequency and amount of the regular repayment instalments)
– A clear and concise statement that if relying on a repayment vehicle this might not guarantee repayment of the outstanding capital
– A description of the conditions directly relating to early repayment
– Whether a valuation of the property is necessary and the costs and arrangements relating to it
– An indication of any ancillary services the consumer is obliged to take out
– A general warning concerning possible consequences of non-compliance with the credit agreement
The European Parliament is expected to pass the directive in a vote later this year. From that date the UK will have two years and 20 days to comply with the new rules.
