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Do you expect to see less or more second charge mortgage lenders in 2018?

ESIS unlikely to change despite Brexit, claim experts

ESIS unlikely to change despite Brexit, claim experts

Loan Talk has been told that any changes to the first and second charge mortgage regulatory system are a “long way down the government’s priorities” following the Brexit vote.

The news comes after the Financial Conduct Authority (FCA) reminded firms that they must still abide by their obligations under European Union law despite the UK public voting in favour of leaving.

The Mortgage Credit Directive (MCD) and the European Standardised Information Sheet (ESIS) are two pieces of EU legislation which apply to the first and second charge lending market and could be impacted by the EU referendum vote.

“I think any changes to MCD and the ESIS process are probably a long way down any government’s priorities at the moment,” said Rob Derry, Managing Director of Brunel Mortgages & Loans.

“However, they could make changes if indications were that the regulations were stifling the housing market, upon which a lot of the economy is dependent. “

Tim Wheeldon, Chief Operating Officer at Fluent Money said the FCA had made it clear that the direction of the European model of regulation and that of the regulator’s was largely compatible and saw no way of turning back.

“By the time we leave the EU, which will not be for at least two years, ESIS will be firmly embedded across the industry. 

“The only good reason for reversing it would be if it is found to be unfit for purpose.”

Paul Day, Sales Director at Clever Lending added: "The ESIS is likely to be unchanged, whether we're in Europe or not. 

“We signed up for a regulatory standard, but will wait to see what clever people in the industry come up with.  

“We will need to mirror European standards regardless of how and using their standard is easier than creating your own.”

Tony Marshall, Managing Director of second charge lender Equifinance, agreed stating new legislation had helped improve the awareness of the industry. 

“Treating customers with transparency by using documents such as the ESIS is a good thing and I think a clear process is essential. 

“Even if the name of the document changes, it'll still be used in some form."

Nicola Mooney, Head of Secured, Intermediary and Business Finance at Freedom Finance added: “I don’t foresee that there will be a huge change in the ESIS process as a result of the UK leaving the European Union. 

“The process was brought in to protect consumers and can only be considered a good thing for all involved. 

“For this reason, in the short-term at least, I expect the legislation in place to help safeguard customers to stay.”

As for any changes to the first and second charge mortgage lending market, Rob didn’t see any immediate changes.

“The fundamentals of MCD are reasonably sound and have been a shot in the arm for second mortgages. 

“Maybe the stress levels are a bit tight as they are restricting mortgage credit for some borrowers.”

Paul concluded that the UK already had more sophisticated regulatory requirements than many in the EU before the introduction of MCD.

“However, many lending institutions have invested heavily in the production of the ESIS and the option of providing a KFI+ is still in play until 2019 for first charge lenders.

“So it will be very interesting to see how this plays out over the coming years."

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