Mortgage Credit Directive: Changes in Risk

The Mortgage Credit Directive is a framework of conduct rules for mortgage firms that was introduced by the EU in 2014 and comes into effect in the UK on the 21st of March 2016. Most of the MCD covers pre-sale areas like advertising and disclosure, areas that are already tightly regulated in the UK. As Britain already has strong mortgage regulations, much of what the MCD requires can be achieved through pre-existing FCA guidelines and related laws.  The changes are, by and large, more “technical” than those brought in by 2014’s Mortgage Market Review and the impact will be less obvious, for the most part.

Areas that will see big change are the second charge and buy-to-let markets. Second charge mortgages have previously been regulated as consumer credit, and the MCD will see this ending as they come under the main mortgage regime and become subject to many of the rules that have previously only applied to first charge mortgages. Under the new rules all consumers who re-mortgage with a new lender will now need to have an affordability assessment, even if the they’re not looking to borrow more.

While the changes being made to affordability assessment requirements where a customer is re-mortgaging will impact on all lenders equally, the FCA has recognised that there may be “implications for how some mutual societies seek new business” as many mutuals will find they now have to go beyond their traditional pool of regular brokers for the first time.

Second charge firms and their representatives have been voicing concerns with the overall weight of regulatory change they’re facing as we approach March What does this mean to the workload of the already overworked risk function?  Are you concerned about what does this mean for your organisation?

To have a confidential discussion about your organisation’s risk needs, contact me on 0121 643 2100 or e-mail

Get in touch