Mortgage News
BSA: EC mortgage directive could cost industry “tens of millions”
The European Commission’s proposed replacement for the Key facts Illustration could cost tens of millions of pounds to implement, said the Building Societies Association.
In the proposed European Directive on responsible lending and borrowing out today, the BSA said the flimsier European Standardised Information Sheet (ESIS) which could replace the Key Facts Illustration, is unlikely to deliver any real benefit to consumers.
The mutual trade body said with UK mortgage lenders subject to parallel regulatory intervention at both a national and European level, there is a risk that the draft Directive could conflict with the FSA lending proposals expected to be published in the summer.
Paul Broadhead, head of mortgage policy at the BSA said: “Now that the draft Directive is published, it is vital that the FSA pays close attention to its effect on the mortgage market review (MMR). The summer consultation will need to incorporate the European dimension if it is to include a full and robust impact assessment.”
The European Commission proposals have been passed to the European Parliament and Council of Ministers for consideration.
But under the draft proposals, lenders could be required to give applicants rejected for a mortgage an explanation for the failed application.
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The proposals suggest UK lenders should also meet certain standards for the provision of advice and assess the consumer’s ability to repay, based on information provided by the borrower.
Intermediaries will be required to disclose certain information concerning for example, their identity, status and relationship with the creditor, to make any potential conflicts of interest obvious.
In addition, they will be entitled to repay their credit before the expiry of the credit agreement, subject to certain conditions to be determined by Member States.
The EC said that borrowers would benefit from extra information at all stages in the process of taking out a mortgage allowing them to make the right decisions.
Under the proposed rules, borrowers will be exopected to show they can afford to repay a mortgage and lenders will also have to comply with a raft of rules on advertising mortgage credit, with lenders banned from including wording that may create false expectations over the availability or cost of credit.
The proposed directive will also establish principles for the authorisation and registration of intermediaries and for the establishment of a passport regime for those intermediaries allowing them to work across European borders.
Lenders and credit intermediaries will be required to make general information available at all times on the range of credit products they offer, through a European Standardised Information Sheet or ESIS.
This will aims to allow consumers to compare mortgage providers and products from different providers.
To read the directive, click here