Mortgage Regulation Could Put End to Bridging Loans

by Mark Johnston

The Council of Mortgage Lenders has again fought back about a new EU directive to give mortgage customers a 10 day cooling off period. The plan would mean that mortgage customers would be given 10 days to decide whether a deal was right for then, it would give them time to search the market for a better deal and allow them time to make sure it was right for them.

The Council of Mortgage Lenders has slammed the idea as they do not think its in anyone’s interest and will benefit no one. Their main argument is that the majority of mortgages in the UK are arranged through brokers that search the market for the best deal and provide advice. This may have been the case some years ago but now the vast majority of home loans are agreed direct with the lender as they offer cheaper rates.

The industry are still waiting for their new rules of mortgage lending to be finalised and the CML are concerned that some of the regulation may overlap or contradict the EU requires. The industry has expressed a concern over both sets of regulation as they feel they are not taking the UK market into consideration and instead trying to apply a one size fits all approach.

A spokes person from the CML said: “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.” They went non to critise the changes by 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. 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.”

The CML are also concerned that the new cooling off period to put an end to bridging finance resulting in less choice and flexibility for customers.

Bridging loans are designed to be short term finance and require the mortgage to be completed quickly. The new rules to allow customer 10 days before a mortgage can be progressed will delay the whole process and mean bridging loans become ineffective.

The European Commission appears to be out of touch with what’s happening in the mortgage market and seems intend on a one size fits all approach which simply doesn’t work.

There main objective of the EC seems to be to push a cross-boarder approach to open the market up but the CML don’t believe that this will have any benefit as all the lenders that are able to offer cross boarder mortgages do so already as they have local bases in each country.

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