The FCA said: “The consultation revealed a compatibility issue between the MCD and our existing responsible lending regime, which means that we must change our rules so that all consumers who re-mortgage with a new lender must have an affordability assessment, even if the consumer is not looking to borrow more.”
However, those who change products with an existing lender will not need an affordability check if there is no extra borrowing and no other
changes to terms likely to be material to affordability. This will also apply to second-charge regulated mortgage contracts.
The rules released by the Financial Conduct Authority attempt to align the European Mortgage Credit Directive with the Mortgage Market Review and lay out new conduct governing mortgage and second-charge lending.
The paper called Implementation of the Mortgage Credit Directive and the new regime for second charge mortgages, feedback to CP14/20
and final rules follows the consultation, which ended on December 29.
The FCA said there was strong support for its proposals to regulate second- charge lenders in line with first charge. However, it has simplified rules surrounding the interest rate stress test second-charge firms will have to carry out.
The FCA also said it has listened to concerns from the second-charge industry about the volume of regulation and tight timescale with implementation expected by 21 March 2016. So, the regulator has pushed back elements of implementation for one year to 1 April 2017.
It said: “We will introduce Product Sales Data (PSD) ‘sales’ and ‘performance’ reporting for second charge firms a year later than originally intended.”
The regulator said: “All firms involved in regulated activities relating to mortgages or loans used to acquire or retain property rights in residential property, should consider how our new rules apply to their business and implement the changes necessary to comply within the appropriate timeframes.”