European MPs have voted to ban mortgages that are tied to other products such as savings accounts.
Last week, the European monetary and economic affairs committee voted through a number of draft proposals on the European Commission’s directive.
One of these stipulates that lenders will not be allowed to sell mortgage deals linked to savings accounts where the account is not used solely for the purpose of repaying the mortgage.
Also under the Econ’s proposals, voted through last week, variable-rate loans must be calculated using an index or reference rate that is clear, accessible, objective and verifiable by the parties to the credit agreement and the authorities. Buy to let will be exempt from the regulations and the key facts illustration will not be scrapped for five years from the time the proposals are introduced. After this time, the KFI will be replaced by a European standardised information sheet.
A 14-day cooling-off period after customers sign a mortgage deal has been proposed by MEPs to allow customers time to reflect on the deal but it is still not clear if member states will be given the power to decide whether they want to introduce it.
Coreco director Andrew Montlake says: “You can see why the Econ is suggesting banning bundled deals to ensure borrowers are not being forced to take out other products they do not want. But in this market, the last thing we need is more European regulation that stifles innovation.”
The amendments, along with the internal market and consumer protection committee’s amendments and the European Commission’s original proposals, must be voted through the European parliament. The European Council will then decide its position and the council, parliament and commission will negotiate the final text.