The regulations, which are set out in the EU Mortgage Credit Directive, set common standards that EU members need to meet in order to protect consumers taking out loans to buy a residential property.
The reforms aim to tackle any future risks to financial stability from the mortgage market at a much earlier stage.
While Britain already complies with most of these new EU rules, the legislation implementing the directive contains some changes which include:
- Bringing the regulation of second charge mortgage lending into line with first charge mortgage lending.
- Introducing a new set of regulations for buy-to-let lending, where the lending is to consumers rather than for business purposes. This is not expected to affect the vast majority of buy-to-let lending which is done for business purposes and is therefore not subject to the directive.
The changes will come into effect in March 2016.
Robert Sinclair, Chief Executive of AMI, said:
“AMI is delighted that Treasury has listened to the voice of the broker and made changes to take brokers out of the scope of the consumer credit regime for unregulated buy-to-let loans. In addition the clarification on what comprises regulated consumer buy-to-let is positive.
"AMI was concerned that the directive risked an interpretation that regulatory responsibilities lay at an individual level for credit intermediaries and appointed representatives. It has been clarified that all references remain applicable to firms and their principles, rather than moving down to individual brokers. The Treasury has also ensured that introducer representatives are not to be fully captured under the consumer credit regime.
"There will still be huge challenges for FCA, lenders and brokers in ensuring as seamless a transition as possible, due to the tight timescales involved, but AMI is committed to working with the wider industry to ensure consumers are impacted as little as possible. We await the FCA policy statement and final rules with interest.”
