At Clydesdale Bank we have been working hard to prepare for the introduction of the MCD rule requirements which are introduced on the 21st March 2016.
Over the next few weeks we’ll keep you updated with any changes we make to our systems and documents, along with key dates. Meanwhile, we want to let you know what you can expect from us.
What is the European Mortgage Credit Directive?
The Mortgage Credit Directive (MCD) introduces a European framework of conduct rules for lenders selling First and Second Charge Mortgages. It’s designed to protect customers across Europe and has similar aims to the FCA’s Mortgages and Home Finance: Conduct of Business Sourcebook (MCOB).
ESIS and KFI plus
From 21 March 2016 the European Standardised Information Sheet (ESIS) can replace the Key Facts Illustration (KFI). To help transition, lenders can use the current KFI but include additional information. This is commonly known as the “KFI plus” and it’s the approach we’ll be taking, though we’ll refer to it as the “mortgage illustration”. We’ll let you know when this is available.
Annual Percentage Rate of Charge (APRC)
A mortgage illustration will now include information for customers on the potential impact of interest rate changes. This will describe both the APRC and will illustrate a lender’s highest interest rate over the last 20 years.
Conditional and Binding Offers
It is common practice for lenders to make conditional offers that are subject to further checks. The MCD stipulates that lenders must now make a binding offer to customers. Our offers will be binding subject to lawful conditions, for example a material change.
7 Day Reflection Period
Our Binding Offer will include a 7 day reflection period from the day it is received by the customer. This allows the customer time to consider the offer before committing to taking out the mortgage.
Customers may waive their reflection period either by confirmation to the Bank or by the submission of the Certificate of Title by the solicitor, as directed within their offer packs.
New Consumer Buy to Let
MCD rules introduce a new regulatory framework for Consumer Buy to Let (CBTL) loans. These loan types will be supervised by the FCA.
You must be authorised and registered with the FCA to undertake CBTL business.
Clydesdale will accept CBTL applications. We will provide further guidance on how these loan types will be defined by you and how you will notify us of this mortgage type via the application form.
Foreign Currency Lending
This refers to a loan that is in a currency other than that of the income or assets used to repay the loan or where the loan is in a currency that differs from that where the customer is resident. MCD rules introduce new rights for foreign currency borrowers, meaning additional information on foreign currency loans must be provided. This includes an illustration of the impact of a 20% change in the exchange rate.
We do not currently support any foreign currency lending as defined by the MCD rules. This means we are not able to use any non-sterling element of a customer’s income and we are not able to lend to any customer not resident in the United Kingdom. This includes non-regulated Buy to Let lending.
Affordability
At Clydesdale, our existing Responsible Lending policies will continue to be used to demonstrate and assess appropriate affordability. We are not making any changes to our affordability assessment under MCD.
Pipeline Cases
For an application which has not already offered by 21st March 2016 we may need to contact you to confirm the BTL regulated status. The Bank will not require any additional information for residential applications.
Where a pre-MCD offer has been issued, unless the customer informs us they are not happy to go ahead within 10 working days from the date of the offer being sent, we will proceed on the basis that the customer has agreed to the terms of the mortgage. The customer still has the right to change their mind up until they are ready for the mortgage to complete.
The MCD framework will not be applied to any pre-MCD offer accepted before 21st March 2016.
We plan for the new binding offer to be issued from early March which would mean that any offers issued before the introduction of the binding offer will have been accepted before 21st March 2016 and therefore the MCD framework will not apply to these cases (unless the customer confirms they are not happy to go ahead or lawful conditions are not met).
We will advise you in due course of the date from which our documentation will comply with the new MCD rules.
Where do I go for further information?
View the MCD updates on www.fca.org.uk or if you have questions specific to Clydesdale Bank please speak to your Relationship Manager.
Updates will be communicated via email and posted to www.clydesdalebankintermediaries.co.uk to keep you fully informed on our progress.
