Government to resist fundamental MCD change
Some of the major changes included in the MCD see second charge regulation brought in line with first and the introduction of a new set of regulations for buy-to-let lending.
The Treasury has been vocal about the UK’s already “robust regulatory system” but is still expected to implement the MCD requirements by 21 March 2016 in order to meet its Treaty obligations.
In its consultation the Treasury said: “The government is not proposing any fundamental changes to its overall approach to implementation following consultation.
“However, the consultation document highlighted that it would consider whether there were further steps that could be taken to ease the transition to the new regime.”
One of these first steps sees the government make it possible for all firms subject to the MCD to adopt the revised rules up to six months ahead of the implementation date.
The Treasury said: “Those firms that can make the necessary changes in time to take advantage of this flexibility will be able to reduce the disruption caused by the transition, as they could ensure that most of their mortgages in the ‘pipeline’ on 21 March 2016 already meet MCD requirements.”
The government also clarified details about the implementation of the MCD and confirmed that cases where credit is granted before the implementation date will not be subject to the directive.
Additionally it clarified the new rules relating to buy-to-let. If a buy-to-let loan is for business purposes, and a property has been purchased with the sole intention of letting it out, the borrower has never lived in it, and/or the borrower taking out the loan has other buy-to-let properties then the loan will be outside the scope of the regulation
Lenders will also have a provision that allows them to evidence the categorisation of a buy-to-let loan through a borrower declaration which should limit the impact of the MCD.