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EU to unveil stricter mortgage rules for lenders
Mortgages are a key part of our service here at Census, so we’re particularly interested in this recent directive from the EU.
In a move that’s probably aimed at avoiding a repeat of the mortgage arrears crisis, our European cohorts have announced rules which will force lenders and brokers to be far more transparent with their mortgage packages. It means that lenders will be required to issue clear and concise information packs to borrowers across the UK and Europe, allowing them to easily compare mortgages between different providers.
The directive says: “Member states shall ensure that creditors and credit intermediaries consider a sufficiently large number of credit agreements available on the market so as to enable the recommendation of the most suitable credit agreement for the consumer’s needs, financial situation and personal circumstances.”
Information sheets will have to provide easy to understand language, plus a summary of all of the mortgages terms. Lenders will also have to allow borrowers to pay off their mortgages early. They will also be forced to disclose to customers why their application has been rejected, with consumers able to request a manual review of decisions. The directive is no doubt designed to ensure a high standard of pre-contractual information and improved lending practices across Europe, and to promote a dynamic, competitive and more integrated single market for mortgage credit.
While this may appear to provide a huge boost to mortgage customers in the UK, we believe it also poses some very real and practical problems. For example, it means that lenders giving advice will have to offer products from competitors – possibly even recommend a rival’s product. And that, quite frankly, seems highly unlikely. Indeed it may lead to a situation where lenders will only offer information, not advice.
The proposals have come at a time when experts are warning that there could be further financial trouble ahead for the mortgage market, as people who took out 100% mortgages find themselves falling further into negative equity, and an increase in interest rates could see them fall into arrears. Watch this space.