In the FCA's final rules for the Mortgage Credit Directive, the regulator amended its original proposals on the requirement for second charge lenders to consider the impact of rate rises on the first charge mortgage.
The Government has decided to move the regulation of second charge mortgages into the mortgage regime when the UK implements the MCD.
Smart Money believes that while the majority of the industry enthusiastically supports full integration into the main regulatory framework, there was always a danger that some of the positive features could be lost by unnecessary layers of bureaucracy.
Industry representatives expressed concerns that consumers would not know the interest rate of their existing mortgage(s), and were concerned about the delays and costs that would arise if second charge lenders were required to obtain that information from other sources, such as directly from the first charge lender. The regulator has therefore amended the rules to remove the need to obtain the interest rate.
Paul Crewe, Managing Director at Smart Money, said:
“The FCA has demonstrated that it is listening to concerns from within the industry. The extra time required to verify clients’ interest rates on their mortgages could have made the process laborious and unwieldly. While assessing affordability is a crucial area, by reviewing this part of the directive proposals, the FCA has provided clear guidance and forestalled an unnecessary brake on the speed with which applications can be approved. Also it can no longerbecome a potential means by which existing first charge lenders can ‘hold up’ clients in their desire to raise capital by not responding to requests quickly.
"“The industry is moving positively to embrace the changes which will come into force in 2016. Personally, I think this move by the FCA only reinforces mybelief that full integration will be a great success as it reinforces the view that second charge lending is now an important component in the lending community.”
