Equity release has been removed from the modified Consumer Credit Directive (CCD) Proposal, issued by the European Commission.
In the latest version of the CCD-Proposals, the document excludes all credits “secured either by a mortgage on immovable property or by another comparable surety commonly used in a Member State”, which means mortgage equity withdrawal loans have been removed from the proposals.
The move has been welcomed by the European Mortgage Federation (EMF), which claims equity release, being mortgage loans, do not fit into a legal framework specifically designed to address consumer credit products.
Matthias Tierner, head of legal affairs at the EMF, states the organisation is pleased at the decision, because mortgage loans are different, long-term products, often funded through long-term instruments, such as mortgage bonds and mortgage backed securities, with a low-risk profile and low interest rates.
He adds: “What is more, it would make no sense to split mortgage credit between different regimes. As a consequence the Code of Conduct on Home Loans could be at risk.”
Other modifications to the CCD-Proposal include replacing the principle of a “duty to advise” to a “duty to explain”, along with a requirement all existing databases on consumer credit should be opened up to EU credit providers on a non-discriminatory basis, instead of requiring the setting up of new consumer credit databases at a national level.
Despite these modifications meeting the approval of the EMF, it claims the CCD-Proposal, although a marked improvement on the previous version, could still be further improved, particularly with regard to the scope of the proposal, as the EMF believes non real estate secured as well as non secured housing loans should also be excluded from the proposals.
Meanwhile, the decision to remove equity release from the CCD-Proposal has been seen by many in the industry as a way of allowing it to feature in the White Paper on Mortgages, which was scheduled to be published this month, but which has now been delayed until later in the year.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Nyree Stewart on 020 7968 4558 or email [email protected]IFAonline
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