EU directive to make mortgage offers legally binding

Sam Cordon

October 2, 2013

Speaking at the Financial Services Expo, Lynda Blackwell, manager of mortgage policy at the Financial Conduct Authority, described the rule as the “first significant piece of grit to enter the system”.

She said: “There is already a significant obligation on lenders to gather all the information they need to make a lending decision and they use the intermediary channel as an efficient way to collect this information.

“But the fresh twist from the directive is that lenders cannot withdraw from the agreement before the term of the loan has expired on the grounds that they did not have all the information they needed to support that decision.”

Blackwell said the new rule would mean brokers may find they will have a greater information gathering role.

The rule specifies that member states shall not be allow a creditor to terminate the credit agreement on the grounds that the information provided before the conclusion of the credit agreement was incomplete.

The only instance where lenders can withdraw the agreement is if it is found to be fraudulent which is described as withholding or falsifying information.

She said: “If you were a lender how would you obtain this degree of comfort. This could amount to a significant delay in the sales process.”

“This means lenders will taking a much closer interest in the questions they are going to ask and brokers may find themselves having a greater information gathering role.”

It is expected that the final rules will be publised in November this year and the UK will have two years and 20 days in which to implement it.

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