The Treasury published on 26th January the final legislation in relation to the European Mortgage Credit Directive, to be presented before parliament soon.
The government once again stated its intention to keep the legislation within the existing regulatory framework in the UK and to put in place “the minimum requirements to meet the UK’s legal obligations.”
However, the Building Societies Association believes the European MCD, which will come into force next March and apply to both homebuyers and lenders, “will offer little or no benefit to UK consumers.”
Paul Broadhead, head of mortgage policy at the BSA, said the association is still of the view that the MCD “will add cost, complexity and some confusion to the mortgage process.”
“However, we welcome the Government’s approach to implementation, putting in place the minimum requirements to meet European law. The introduction of an appropriate framework for consumer buy-to-let will keep the majority of buy-to-let lending outside the scope of regulation, minimising the disruption to this market,” Broadhead said.
The new rules apply to consumer buy-to-let mortgages (providing some clarifications about the definition of “consumer”) and mortgage pipelines, as lenders were concerned about the completion of loan applications at the time of the implementation of the MCD.
The key points of the new legislation include:
➡ BTL:
*Buy-to-let loans used solely for business purposes will be outside the scope of the regulation
*Lenders will be allowed to categorise BTL loans based on borrower declaration. In this borrowers can declare they will use the BTL property wholly or predominantly for business purposes.
*Consumer BTL mortgages have been recognised to be a very small part of the BLT and the mortgage market as a whole.
*Consumer BTL mortgages are currently treated as regulated mortgage lending, which means no the impact of the new rules will not be significant
*The Financial Conduct Authority will be supervising and enforcing the new rules.
➡ Mortgage pipeline:
*All mortgage applications filed before the date of the MCD implementation, 21st March 2016, will not be subject to the MCD.
