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Secured Lending Update
14/08/17

This email updates members on a number of recent regulatory issues affecting second charge lending. 

EU Benchmark Regulation and Mortgages

In the FCA’s Consultation Paper CP17/17 Handbook changes to reflect the application of the EU Benchmarks Regulation, the FCA refers to an amendment to the Mortgage Credit Directive (MCD) which they need to implement.  This amendment requires lenders and tied credit intermediaries who offer any mortgages linked to a benchmark rate, to make available the name of the benchmark, who administers it and the potential implications for consumers. 

This requirement comes into force on 1 July 2018 (as opposed to 1 January 2018 for the other changes under the Regulation).  The FCA believes it should be relatively inexpensive to make this change, as it can be satisfied by lenders adding the information to their websites. 

We are currently reviewing the position of the FLA’s Finance House Base Rate (FHBR) in light of the EU Benchmarks Regulation and wider discussions on the future of Libor etc.  An update will be provided at the next Secured Lending Group meeting on 21 September 2017. 

The FCA has also discovered that one clause in Article 13 of the MCD has not been transposed into MCOB.  This clause requires lenders and tied credit intermediaries to disclose a description of the conditions related to early repayment.  The FCA will transpose this clause into the Handbook at the same time as the earlier benchmark amendment – 1 July 2018.  

Support for Mortgage Interest (SMI)  

Earlier this year, Tim Roscamp from the Department of Work and Pensions joined a Secured Lending Group meeting to discuss the changes to the payment of Support for Mortgage Interest (SMI) – which will convert from being an SMI benefit to an SMI loan from 6 April 2018.  This will affect both new and existing claimants and has been implemented via the Welfare Reform and Work Act 2016  Regulations providing details of the scheme will come into force later this year.  Further information can be found on the attached information sheet. 

The DWP has also published two SMI research reports:

Support for mortgage interest: attitudes towards taking the support as a loan

Support for mortgage interest: mortgage borrowing and claiming in retirement

Some of the key findings were: 

  • Knowledge of SMI is very limited, even among claimants.
  • The relatively low profile of SMI, even among recipients, is also shown by the very limited knowledge which individuals have about the changes due to happen in 2018 when SMI is converted from a benefit to a loan.
  • Only a minority of respondents say they are likely to take up an SMI loan,
  • Among members of the targeted sample of the public, only one in seven (15 per cent) say they are likely to take up an SMI loan, compared with the great majority who say they are unlikely to do this (79 per cent).

Meeting Dates 

13 September 2017 – Secured Loan Forum meeting – Lenders and Brokers –– Marriott Hotel – Forest of Arden (see email attached)

With presentations on the General Data Protection Regulation, Senior Managers & Certification Regime and FCA supervision on lending and advice. Please complete the booking form if you would like to attend. 

21 September 2017 (1pm to 3pm) – Secured Lending Group Meeting

We will be joined by the FCA to discuss their current discovery work looking at the second charge mortgage market.

24 October 2017 (10.30am to 12.30pm) – Mortgage Compliance Working Group Meeting