Thanks to an EU directive, people needing to remortgage will have to undergo affordability checks if they try to switch lenders – meaning that a number of so-called mortgage prisoners will remain trapped.
The Mortgage Credit Directive could particularly hit people going into retirement, who took out interest-only deals and who have no means of repaying their debt unless they remortgage or downsize. It has been dubbed the mortgage time bomb.
The directive over-rules arrangements made in the UK by the Financial Conduct Authority.
When the Mortgage Market Review was introduced almost a year ago, the FCA said that “trapped” borrowers would not have to undergo the checks as long as they did not want to borrow more money and had a good payment history.
However, the FCA has now said that it is having to withdraw its arrangements “as they are not [Mortgage Credit Directive] compliant”.
Robert Sinclair, chief executive of the Association of Mortgage Intermediaries, said: “This is an issue where European legislation has made it worse for UK consumers – there is no doubt about that.”
The transitional arrangements were originally introduced because of fears of a ‘mortgage time bomb’, with a number of borrowers on interest-only loans and no means of paying them off unless they switched to a product that included capital repayment.
Comments (3)
And Europe is full of long term renters? UKIP it is then.
Do we not have enough common sense in this country to make our own rulings, laws and policies? Let’s just get out of there.
Another bonkers directive from Europe ! Why on earth have we accepted to apply this nonsense to our financial sector when we have the FCA ? Doesn’t this now make the FCA redundant ? And is this directive supposed to protect the lender or borrower ? Can’t we just let them get on with it without nanny Europe looking over their shoulder?