Last week, the European Monetary and Economic Affairs committee – ECON, voted through a number of draft proposals, including the right of individual governments to exclude buy-to-let from regulation.
On mortgages linked to savings accounts, the Directive said: “Member States may permit tying practices where creditors require the consumer or a related person to open or maintain a payment account or savings product where it is a fully integrated part of the credit or whose only purpose is to which can be used to accumulate capital to repay or service the credit, or to conclude a separate credit agreement in conjunction with a shared-equity credit agreement.”
The BSA and CML said they are continuing to review the implications for the shared equity market.
The Building Societies Association, said: “Our interpretation of this is that the proposal is referring to parentally guaranteed mortgages where the deal is partially guaranteed on the parents’ savings. If this is the case, products including Lloyds Banking Group’s Lend a Hand mortgage and Bath Building Society’s Buy for Uni deal would be affected by this.
“We’re seeking input from the Treasury and the Financial Services Authority to see what it thinks this relates to.”
The Council of Mortgage Lenders (CML) said it does not see the proposal as a problem.
“The wording of the section about tying practices is ambiguous especially with regard to guarantor savings mortgages. The EU parliament version of the Directive clearly allows tying of savings products, but it is unclear if they are limited to those in the borrower’s name, or if it can include guarantor savings accounts, held by parents for example. We are working to discover how it will affect the very small number of lenders who have products that may fit the description.
“However, this doesn’t affect offset mortgages. If it does affect anyone, it will be a small minority.”
Lend a Hand allows first-time buyers to access the deal with a deposit of 5%. The only provision is that the buyer’s guardian or other family member lodges a further 20% with Lloyds TSB in the form of savings.
Meanwhile, Buy for Uni enables students in England and Wales to borrow up to 100% of a property’s value, to a maximum of £250,000 (£300,000 inside the M25) using equity in their parents’ home as additional security and with parents acting as guarantor.
Kevin Gray, deputy chief executive of Bath Building Society said: “With our own arrangement we would not be collaterally charging savings accounts. It’s possible that people might have offered that in the past, but what we tend to do is collaterally charge parental homes. Whether that’s captured or not remains to be seen, but I don’t think it is.”
