A survey carried out by the Intermediary Mortgage Lenders Association (IMLA) found that 74% of mortgage brokers were worried about the directive’s effects on lending over the next year with 71% of lenders sharing the same view.
Lenders are allowed to adopt the new rules from 21 September giving them a six-month window to embed changes before the March 2016 deadline. But the head start has done little to put brokers’ minds at rest as 40% said they feared a smooth transition would be more challenging for the industry that the Mortgage Market Review (MMR).
The main changes under the directive will be the move to a disclosure document called a European Standardised Information Sheet (ESIS) which will replace the Key Facts Illustration (KFI), the introduction of a second Annual Percentage Rate (APR) and the need for advisers to consider secured loans alongside a remortgage option. A seven-day right of reflection is to be added to the process after the mortgage offer has been given to the applicant.
Only 5% of brokers felt the introduction of a second APR would benefit the UK mortgage market. Some 70% of brokers disagreed as did 86% of lenders. The KFI replacement has been met with similar scepticism as 68% of brokers and 86% of lenders said there would be no benefit in the switch.
Peter Williams, executive director of IMLA, said that even though the changes were more of a technical nature than those brought in under the MMR he hoped they would not place too heavy a strain on the market in the coming months.
“Every new layer of regulation brings a danger that it will upset the balance between protection and access for consumers with legitimate cases to be granted a mortgage, as well as imposing extra costs and reducing efficiency,” said Williams.
He added: “The governor of the Bank of England recently highlighted the scheduled open forum in November when it is planned to look at the impact of the reform agenda in financial markets. It would be helpful if the mortgage market was part of this to ensure we can move forward on a stable footing.”
Barclays and Santander recently revealed details of their MCD roll-out plans but the majority of lenders have yet tell brokers when they plan to go live with the new rules.
