Europe suggests 14-day mortgage cooling-off period

A committee scrutinising the EU’s mortgage directive has resurrected the idea of a 14-day “cooling-off period” for borrowers after a mortgage offer has been made.

Plans for a 10-day cooling-off period were considered by the European Commission when it first began to formulate its draft proposals, but it emerged in January that the EC was not considering its as part of the directive.

A draft directive was published in March with the aim of promoting responsible lending and borrowing across Europe. The next stage in the process is for two separate committees of the European Parliament – the economic and monetary affairs committee and internal markets and consumer protection – to report on their reactions to the proposals. Each committee nominated a rapporteur to draft a report.

While the IMCO report is not expected until September, the ECON report, with Antolin Sanchez Presedo as its rapporteur, has attempted take the directive in what the Council of Mortgage Lenders calls “another, entirely unexpected, direction”.

The report seeks to reinforce consumer protection and includes measures such as:

·     the introduction of a ’cooling-off’ period for borrowers of at least 14 working days after a mortgage offer has been made;

·     compensation for consumers if credit is rejected because a reference agency supplies an inaccurate report;

·     the right for borrowers to make overpayments without penalty, and for them to be able to draw down in the future any overpayments they have made; and

·     a ban on arrears charges if payment problems arise that are beyond the control of the borrower.

·     It requires member states to regulate how lenders and intermediaries are paid, with rules to prevent financial rewards linked to sales of individual products.

·     To prevent both automated underwriting as a substitute for expert risk assessment and scoring based solely on credit history or from external sources.

In its latest News & Views newsletter, the CML says: “We believe that the ECON report takes proposals for European regulation in an unexpected direction, which is inappropriate to the needs of consumers and firms that continue to operate essentially in separate markets. 

“As we move into the autumn, we will be working with lenders and other interested parties – in the UK and Europe – to seek to ensure that European regulatory proposals are appropriate to the needs of firms and consumers in different countries.”