In its response to the Financial Conduct Authority’s consultation on implementing the European Mortgage Credit Directive (MCD) in the UK, the Council of Mortgage Lenders (CML) has identified four main areas where a change of approach is needed to achieve minimum disruption to the UK mortgage market.

The four areas where the CML has concerns are:

• The absence of sufficient measures to manage the transition to MCD rules. At present, there is no provision for “pipeline” cases. Such a provision was crucial in the successful implementation of the Mortgage Market Review and the CML believes this approach should be replicated for the MCD.
• Fundamental changes to the sales process that will confuse customers. The new requirement for a reflection period following a “binding” offer does not need to introduce a new step in the conveyancing process, as the current implementation proposal suggests. The CML says that the formal offer should be treated as the binding offer – this fully addresses the MCD requirements while minimising confusion.
• Ensuring the MCD applies to new lending only. As currently drafted, the proposal is confusing and could be taken to apply to contract variations, which is not the intention. The FCA should make this explicit.
• The disruptive definition of foreign currency loans. While the CML agrees with the objective of mitigating the risk of currency variation, the proposals apply too widely and the scope should be more narrowly defined.

Paul Smee, CML director general, said: “The Directive provides little if any benefit to UK consumers or the operation of the market. We believe that both the government and the regulator share this view.

“So, while we naturally recognise the need to comply, we believe that the UK should do so in a pragmatic way that disrupts the existing robust regulatory regime as little as possible.”