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Clydesdale latest lender to unveil foreign currency plans

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  • 22/09/2015
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Clydesdale latest lender to unveil foreign currency plans
Clydesdale Bank has announced it will cease all lending for foreign currency mortgages and non-UK residents, ahead of the Mortgage Credit Directive (MCD) implementation in March 2016.

The lender will not accept any applications which meet the MCD’s definition of a foreign currency mortgage after 5pm on Wednesday 30 September.

Clydesdale said it will only accept fully packaged mortgage applications, adding that any offer produced prior to its end offer date would be valid for a period of 90 days and could not be extended.

Clydesdale’s criteria changes go a step further than the decision made by Lloyds Banking Group earlier today to end lending to borrowers whose income is not in Sterling.

Under the MCD rules, a foreign currency mortgage is defined as a loan that is either in a currency other than that of the customer’s income or assets from which the loan is to be repaid or in a currency that differs from that of the country where the customer is resident.

Clydesdale said because of this definition it was unable to consider using any non-Sterling element of a customer’s income; it would not lend to any individual that did not reside in the UK; and could not accept any non-Sterling repayment vehicle for interest-only mortgages.

In a statement a spokesperson for Clydesdale Bank said: “Ahead of the Mortgage Credit Directive changes we have taken the decision not to offer lending to new mortgage customers in these scenarios.”

Ian Gray, senior partner at Large Mortgage Loans, said some high street lenders were interpreting the rules in ‘a harsh way’ which could mean these borrowers are pushed further in the direction of private banks.

“All private banks have always supported certain borrowers who earn in a foreign currency because they take a view as to whether the borrower is taking too much risk or not. If the entirety of the high street lenders follow suit, it will push more people to using private banks again.

“It will be very interesting to see how the private banks react to this. Ostensibly they are under the same EU directive, but banning this amongst their borrowers would be very difficult as they tend to lead much more cosmopolitan lives,” he added.

Santander has confirmed that they have no plans to ban lending to people earning in a foreign currency, so it proves that some lenders are interpreting this directive in a harsh way.”

Mark Harris, chief executive of SPF Private Clients, said the move was disappointing, but noted that these customers would be better served by private banks and building societies.

“This is not a huge market and is well served by the private banks. Regional building societies will also pick up some business in this area by being more flexible,” he said.

Nationwide, Virgin Money, Kensington and Bank of Ireland are among other institutions that have confirmed that they will not lend on foreign currency mortgages.

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