The CML has expressed concerns over a European report on lending.

Lenders believe it contains an unexpected attempt this summer to widen significantly the scope of the proposed European directive on mortgages. Measures in a report drafted by Spanish MEP Antolin Sanchez Presedo could have serious implications for mortgage and housing markets in many European countries, the CML said.

Among measures seeking to reinforce consumer protection the report proposes the introduction of a ‘cooling-off’ period for borrowers of at least 14 working days after a mortgage offer has been made.

It also proposes compensation for consumers if credit is rejected because a reference agency supplies an inaccurate report.

In addition, it proposes the right for borrowers to make overpayments without penalty, and for them to be able to draw down in the future any overpayments they have made and
a ban on arrears charges if payment problems arise that are beyond the control of the borrower.

The CML is concerned over the proposals to make over- and under-payments a standard feature of mortgages. While some UK loans allow this option, many do not, and introducing it across the board imposes on firms costs and uncertainty associated with the prepayment of loans and future options for borrowers to draw down overpayments. That could make all mortgages more expensive for borrowers, the CML warns.

It is also worried by measures that would restrict arrears charges in the way proposed or reinforce mandatory ‘cooling-off’ periods. These would also impose cost and uncertainty on firms, and may make it more difficult for higher-risk customers to obtain mortgage finance, the CML says.

The report also suggests that member states should be required to regulate how lenders and credit intermediaries are paid, with rules to prevent financial rewards linked to sales of individual products or targets. The CML argues it is essential to analyse fully the effects and implications of any proposed rule changes in this area.