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Lenders fear EU credit squeeze

Lenders are warning that half the UK mortgage market could be affected by a restrictive new European directive on consumer credit which may be fast-tracked into legislation.

Standard Life Bank says the directive risks wiping out remortgaging, equity release and offset and flexible mortgages or making them more expensive. The bank is also worried that the rules could be rushed through within a year.

The warning follows the Council of Mortgage Len-ders labelling the European Commission&#39s proposals a “paternalistic” death threat for flexible mortgages.

The directive was announced last month and aims to harmonise consumer credit rules in Europe.

The CML says it has not been given a timescale on the directive but is aware that the EU is “very keen” on the proposals, so it could take less time than usual. The CML estimates it will apply to half of the UK lending market, which is expected to total £210bn this year.

Standard Life Bank chief executive Anne Gunther says: “It will either get more expensive to offer flexible, offset, equity-release and remortgage products or they will disappear from the UK.”

CML spokeswoman Michelle Vosper says: “The directive creates additional cost because every time credit is drawn down on a loan, the lender or intermediary will have to offer advice. It makes regulation confusing for the customer.”

Broker franchise Mortgageforce managing director Rob Clifford says: “There is a real risk of dramatically reducing consumer choice if this directive is adopted by the UK and I hear that this is likely to happen.”

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