The Mortgage Credit Directive was implemented in the UK in March 2016.


According to the European Commission the Directive aims to create a Union-wide mortgage credit market with a high level of consumer protection. The Directive applies to secured credit (first and second charge loans) as well as to home loans.

The main provisions include new disclosure requirements, principle based rules and standards for the performance of services (such as, conduct of business obligations, competence and knowledge requirements for staff), a consumer creditworthiness assessment obligation on creditors, provisions on early repayment, provisions on foreign currency loans (including a currency risk warning), and regulation of consumer buy-to-let lending.

Formal adoption of the final text of the Directive concluded a long period of uncertainty for mortgage providers. However, it launched the UK into the next stage in the process towards the Directive becoming law. Both HM Treasury and the FCA consulted in autumn 2014 on the approach to implementation and published draft legislation and rules. HM Treasury published its response on 26 January 2015. It confirms its general approach subject to modifications and will now lay legislation before Parliament for approval. The FCA is due to respond to its own consultation and is now also separately consulting (CP15/3) on the detailed implementation of the new consumer buy to let regime with feedback due by 19 March 2015.

As part of its consultation paper on the consumer credit regime generally, CP15/6, the FCA has proposed consequential changes to CONC to reflect the fact that second charge mortgages will be regulated under MCOB from 2016. Further, to amend MCOB as regards a subset of lending that is not secured on residential property but is used to acquire or retain property rights in residential property. The consultation closes on 6 May 2015.

These changes come at a time when mortgage providers have only recently implemented changes required by the transfer of credit regulation to the FCA on 1 April 2014, and the FCA's Mortgage Market Review rules, which applied from 26 April 2014.

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Key contact

Rosanna Bryant

Rosanna Bryant

Partner, Financial Regulation
Leeds, UK

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