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Europe votes to ban bundled mortgages

European MPs have voted to ban mortgages that are tied to other products like savings accounts.

Last week, ECON ­ the European Monetary and Economic Affairs committee ­ voted through a number of draft proposals on the 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.

This would mean deals such as Lloyds group’s Lend a Hand, where only a 5 per cent deposit is needed and another 20 per cent in savings as security for the mortgage, would not be allowed.

Econ shadow rapporteur and British MEP Vicky Ford was involved in the voting.

She says: “The amendments I wanted regarding the language on tied products did not get through.

“The proposal states that borrowers can use a savings account but only where the sole purpose of it is to repay the principal interest on the mortgage ­ clearly that is not how savings-linked accounts work.”

Ford is now campaigning to get the proposals amended.

Also under the proposals voted through last week, 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 some time to reflect on the deal after it has been agreed, but it is still not clear whether member states will be given the power to decide whether they want to introduce it.

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