EU mortgage directive could bring in ten-day cooling off period

The Council of Mortgage Lenders, which is increasing its pressure on the FSA over the Mortgage Market Review, now also has the EU in its sights, claiming that a new directive could include a ten-day cooling-off requirement.

The CML denounced the idea, which would allow a borrower time to shop round for a different mortgage deal, saying: “As the majority of loans in the UK are arranged by credit intermediaries – mortgage brokers – whose job is to shop around for the customer across the market, this again adds no value in the UK context.”

Two days ago, CML director general Michael Coogan said at the Future Housing conference that one reason why the MMR was flawed was its timing – overlapping and possibly contradicting a new EU mortgage directive about to come through. Key areas of potential conflict include buy-to-let lending and second charge loans, both currently unregulated by the FSA.

The MMR is still out to consultation, as are the EU proposals, with the MMR consultation set to conclude shortly before the EU’s early next year.

The CML said this week: “It is in no one’s interests – regulators, politicians, lenders or consumers – to have the cost of two sets of rules being implemented within a short time frame.

“We hope that the FSA will confirm at an early stage that it is pausing to reflect again on its regulatory approach in the light of developments in Europe.”

Both sets of proposals fail to find approval from the CML, which said the FSA’s approach was about ‘gold plating’ European standards to the detriment of UK consumers and the industry.

It criticised the proposed Consumer Credit Directive, saying: “The Commission needs to have compelling evidence of the need to intervene to protect consumers, and carry out an impact assessment of what it intends to do.”

The CML said it believed mortgage markets are inherently national in nature, with few lenders and even fewer borrowers wanting to transact cross-border. “It is not always helpful or appropriate to seek to draft pan-European rules,” said the CML.

“There is also little hope that reforms will encourage more cross-border lending and borrowing in the foreseeable future. And for the UK there are real risks of detriment for the industry (lenders and intermediaries) and borrowers by pursuing national and European regulatory reform at the same time.”

In a further twist, the international co-ordinating board for financial regulators has launched its own consultation on residential mortgages, this time on underwriting practices. The deadline is October 25.