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UK wins B2L and guarantor mortgage carve outs in Euro directive

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Buy-to-let and parental guarantor mortgages in the UK will avoid new EU rules after officials won a series of key carve outs in final negotiations for the European mortgage directive.

Final negotiations between the European Parliament, Council of Ministers and European Commission concluded last night and it was confirmed that UK buy-to-let mortgages will receive a full exemption from being regulated in the same way as residential deals.

The UK also secured four crucial opt-outs for tough new rules on packaged products that will protect guarantor mortgages, shared equity loans, offset mortgages and endowments.

The directive sought to end the practice of forcing borrowers to take out other products in order to get a mortgage. It would have banned products such as Barclays’ Family Springboard range and Lloyds Banking Group’s Lend a Hand deals as they require savings accounts to be tied to the mortgage.

European Mortgage Federation senior adviser Jennifer Johnson says: “Lend a Hand deals were one of the key issues for the UK, it pushed really hard and managed to get what it wanted.

“It is also an unexpected win on buy-to-let because the best hope was a partial exemption for a long time but it managed to get the full exemption.”

The UK is also understood to have won another exemption that will retain the key facts illustration instead of initial plans to replace it with the European standardised information sheet.

The new rules will see the introduction of a seven day cooling off period, it will remove penalties for early repayment charges and restrict misleading advertising. It will also introduce a rule allowing borrowers to simply return the property to cover any mortgage default as long as it is expressly agreed in the contract, rather than facing claims for the unpaid mortgage payments.

Rapporteur and Spanish MEP Antolin Sanchez-Presedo says: “The new legislation on mortgages will become a reference in terms of consumer protection, financial inclusion and economic stability. It will help to avoid the irresponsible lending and borrowing that were at the roots of the current crisis.”

A draft text from trialogue negotiations is due to be published on 8 May. The European Parliament will cast the final vote on 11 June when it meets in plenary and the new rules should be finalised and adopted in September.

The UK will then have two years to introduce the directive into law through regulation or legislation. 

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