Firms can from today choose to apply the new rules being brought in as part of the Mortgage Credit Directive – six months before they come into effect.
To help with the transition, the regulator has produced a number of factsheets for both brokers and lenders. They set out the changes brought about by the new rules and what firms should consider in order to comply.
The directive is due to come in on 21 March 2016 and applies to first and second charge equally, meaning brokers who operate solely in the second charge space will need FCA permissions. First charge brokers will automatically have the permissions to operate in the second charge market.
As part of the directive:
- The European Standardised Information Sheet will replace the KFI, although lenders can use a KFI+ document until March 2019.
- Brokers will be required, if requested by the customer, to provide a list of the lenders on panel and the range of proc fees paid by each.
- Most of buy-to-let will be unregulated, although ‘consumer buy-to-let’ will become regulated. This is defined as a contract “which is not entered into by the borrower wholly or predominantly for the purposes of a business”.
- Borrowers will be allowed a seven-day cooling off period and offers will become binding.
- Brokers will have to give an “adequate explanation of a product’s essential features”.
- Lenders that offer foreign currency loans will have to include an illustration of the impact of a 20 per cent change in the exchange rates
The FCA says: “You should now be considering the extent to which your business is affected by the changes. You will need to review your existing processes and make any necessary changes to ensure they are compliant with the new rules and remain fit for purpose – for example, to ensure you are able to access and issue the alternative disclosure documents that lenders may use and consider how your existing sales process might need modifying to deliver the adequate explanation.”