Much has been made in recent weeks of the Economic and Monetary Affairs Committee of the European Parliament and its Rapporteur’s draft report on the proposed Directive on credit agreements relating to residential property.
The Rapporteur, (in this case Sr. Antolin Sanchez-Presedo) is appointed by the Committee to write a draft opinion which will form the basis for wider debate.
His report was tabled in July and presented to the Committee on 31 August.
It is easy to get carried away and join the avalanche of comments being written about these proposals, so we must bear in mind the workings of the European process.
This report is currently just one person’s opinion and, whilst we have seen some level of support from MEPs in the initial committee discussion, we will not know the full extent of this support until amendments have been tabled at the end of September.
Even if Sr. Presedo’s proposed amendments pass a vote in committee, then it still remains for the rest of the Parliament to be convinced of its merits early in the New Year.
Plus, for this Directive, there is an extra Committee that is still to provide its report, which must then go through the same processes.
So, we are a long way off anything concrete.
There have been a number of media reports during the summer about elements of these proposals, which include:
- a 14 day cooling-off period to aid shopping around and price comparisons
- the requirement for all mortgages to be flexible and include the right to early repayment and portability (despite the cost this may impose on consumers)
- the potential broadening of the scope of the Directive to include some commercial lending to developers (although this seems to be targeted solely at the Spanish market)
- and the introduction of prudential requirements, including national caps on loan-to-income and loan-to-value ratios
It’s not all bad.
We should welcome the attention the Rapporteur is placing on the need for better financial education.
Better engaged consumers, with more knowledge of how best to manage their finances, will be more likely to want and know how to borrow responsibly in the first place.
However, Europe must be careful not to over-regulate and stifle the very flows of credit to the open market that they are trying to stimulate.
Prudential regulation belongs in the Capital Requirements Directive and overly prescriptive rules around creditworthiness assessments and affordability may freeze out certain segments of society and curb new product innovation.
The BSA, in conjunction with other secured lending trade bodies, will continue to provide detailed briefings to key influencers in Europe with the aim of continuing to influence the debate as it progresses.
Paul Broadhead is head of mortgage policy at the Building Societies Association
