Writing in an opinion piece about the Mortgage Credit Directive for the Council of Mortgage Lenders, Luca Bertalot, secretary general of the European Mortgage Federation, said in some cases where the ESIS document is implemented, consumers were more likely to be confused than supported by the changes.
Bertalot said: “As had been feared, lenders in some member states, often supported by national regulators, are particularly worried about the concrete application of many of the ESIS requirements into law.
“In many cases, these simply do not translate into the national context for a variety of reasons, perhaps as a result of differences in mortgage systems or language. And, in some cases, the outcome is likely to confuse consumers rather than assist them.”
Bertalot added that some of the provisions introduced by the European Parliament ‘are now throwing up questions, but sometimes not many answers’, particularly with regard to foreign currency loan changes. Lenders who choose to continue to offer foreign currency mortgages after the Mortgage Credit Directive (MCD) deadline will be required to introduce customer safeguards to protect borrowers against fluctuations in exchange rates.
He said: “This is a particular concern in some border areas where borrowers are paid in one currency, but could buy a home with a mortgage in another currency – as might be the case, for example, for borrowers from the Irish Republic working over the border in Northern Ireland, or Swedes working in Denmark, or with Finns and Norwegians.”
The MCD’s requirement to facilitate a conversion of a mortgage, from, for example, euros to sterling could be ‘extremely difficult’ for lenders operating a single currency mortgage system, he said.
Bertalot added: “Ironically, these provisions were arguably introduced by MEPs in response to concerns about foreign currency lending in central and eastern European member states – concerns which have, for the most part, since been resolved nationally. Now, the unintended consequences of these requirements are being felt in other parts of the EU.”
However, Bertalot said the UK is ahead of its European counterparts in preparing for the upcoming directive. He explained that the UK had ‘something of a head start’ ahead of the rest of Europe as the Mortgage Market Review, implemented last year, already went beyond many of the directive’s core provisions.
Member states can expect to see a green paper on the future of retail financial services published by the European Commission (EC) later in the year, Bertalot wrote. This could include topics such as digitalisation, cross-border lending and debt advice.
“[The EC’s] focus on consumer issues and protection mirrors the concerns of authorities like the European Banking Authority, which are increasingly turning their attention away from an agenda largely driven by financial stability to one emphasising consumer and investor protection,” said Bertalot.