In 2014, the Financial Conduct Authority will take over interim regulation of second charge lending from the Office of Fair Trading. In the longer term, the EU mortgage directive will not distinguish between first and second charge lending.
Capital Advances director Wayne Smethurst said: “If you go to a mortgage broker to raise money on your property you get a remortgage. If you go to a second-charge lender you get a loan. There is no way of comparing.”
He said the change could also encourage high street lenders to enter the second charge market: “There is a fear of different regulations. This fear is stopping lenders with access to credit from venturing into the second charge market. Once the regulations are the same, that fear is gone.”
Speaking at the Association of Short Term Lenders conference, FCA mortgage policy adviser Lorna O’Brien said the UK had negotiated a ‘win’ on the directive.
The regulator expects the EU to publish the directive by the end of the year. It will then have just over two years to implement the changes. Most of the directive is ‘minimum harmonisation’, meaning the UK regulator will have some flexibility about implementing the rules.
O’Brien said: “The directive does not draw any distinction between first and second charge mortgages. This means once the directive arrives, second charge loans will have to be regulated under the directive and move into the mortgage regime.”
She told lenders: “While we accept there are many legitimate reasons for taking out a bridging loan I am sure you are aware we have some concerns about some aspects of the bridging market.”
These included making sure consumers who took out bridging loans for credit repair had a firm offer following it and making sure fees were clearly displayed, she said.
