However, there is still a long way to go and in particular there are still several areas of concern.
The UK has been granted an extension for the introduction of the new ESIS but we will still have to introduce it. The European argument is for a common disclosure document but it is still not clear what the value is to UK consumers. It is not as if they will be shopping cross border for a mortgage on a UK property.
In any event the UK already has a KFI in place which covers similar ground and the now generally accepted view is that consumers rarely use this KFI document to shop around.
Also of major concern to the market is the suggestion that lenders will no longer be able to use Standard Variable Rate mechanisms in their mortgage products and would instead have to use an external reference rate.
Such a rate may have little relation to the true costs of funds for a particular lender and it may not reflect other critical issues, such as the cost of managing the mortgage assets or credit performance.
The CML also seeks clarity on this, correctly identifying that SVRs are often a key feature of the product range of individual firms.
Finally, we have the well-debated issue of inclusion of buy-to-let. On this point it is important to understand the drafting of the document; it would allow the UK Government to exclude buy-to-let from regulation but this does not mean the UK Government will do so.
No doubt this would be subject to a consultation which would consider the degree to which consumers are at risk of detriment due to the behaviour of lenders, brokers and customers.
The FSA has already indicated concerns over ‘gaming’ and fraud and the industry needs to demonstrate that both these concerns can be diminished by the application of appropriate processes.
There were many policy makers and players in the UK mortgage industry that have questioned the fundamental value of this directive. Despite the limited progress this has made, it is still not clear that the legislation will bring any positive benefits to UK consumers.
John Heron is chairman of IMLA
