HM Treasury has published a Consultation Paper on how it proposes to implement the Mortgage Credit Directive (MCD) in the UK, together with an impact assessment and draft Mortgage Credit Directive Order 2015 (the draft Order), which would amend the Financial Services and Markets Act 2000 (FSMA), the Consumer Credit Act 1974 and the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001.

The MCD sets out minimum regulatory requirements that Member States (including the UK) are required to implement to protect consumers who take out credit agreements relating to residential property. HM Treasury believes that the MCD does not add much to the existing UK mortgage regime. This is especially so in light of amendments to the relevant FCA rules earlier this year following the Mortgage Market Review.

The Consultation Paper proposes to transpose the MCD primarily through FCA rules, as well as the draft Order. The most significant changes to the existing UK mortgage regime include:

  • bringing second-charge lending within the wider mortgage regime, instead of the consumer credit regime; and
  • new rules for by-to-let lending for loans to consumers.

The UK must implement the MCD by 21 March 2016. However, finalised measures to implement the MCD in the UK are expected by March 2015 to give the UK industry time to adjust to any necessary changes.

View Implementation of the EU mortgage credit directive, 5 September 2014

View Impact assessment, 2 September 2014

View Mortgage Credit Directive Order 2015, 5 September 2014

View Directive 2014/17/EU of the European Parliament and of the Council of 4 February 2014 on credit agreements for consumers relating to residential immovable property and amending Directives 2008/48/EC and 2013/36/EU and Regulation (EU) No 1093/2010, 28 February 2014