European consumer credit proposals could spell the end of flexible mortgages, according to the Council of Mortgage Lenders (CML).
The European Commission has published proposals for a directive requiring lenders to give advice to borrowers taking out consumer credit agreements.
The directive would also apply to drawdown credit under the terms of a flexible mortgage. If implemented, the proposals will end the ability to change the amount borrowed without making a new application as is currently possible.
The CML claims that, if made law, the directive could lead to lenders ceasing to offer flexible mortgages, or making them more expensive and less flexible for UK customers.
Michael Coogan, director general of the CML, said: ‘The Commission’s proposal is paternalistic. When flexible mortgages are designed to keep the cost of credit as low as possible, the Commission’s approach seems bizarre.
‘The draft proposal is insulting to UK consumers and would decimate the Treasury’s regulatory plans forged after widespread consultation with the industry in the last two years, putting the industry back in the dark ages.’
He added: ‘Regulation in Europe should promote competition and consumer protection, not hinder innovation and consumer choice. Flexible mortgages are the way forward: the draft directive on credit for consumers is a significant step backwards.’
However, James Mayne, strategic development manager at Britannic Money, said: ‘It is not unusual for proposals from the European Commission to not take into account the complexities of the UK market. As we are involved in flexible lending we are taking this seriously, but are hopeful that common sense will prevail.’
In July, research commissioned by the CML and the Office of the Deputy Prime Minister showed flexible mortgages would be even more widely sought after in the future.