Mortgage credit directive

What is the Mortgage Credit Directive?

The Mortgage Credit Directive (MCD) is a piece of legislation passed by the European Union in response to the financial crisis and the problems it exposed in mortgage lending. It closely mirrors the Mortgage Market Review. The deadline for much of its regulatory implementation was 21 March 2016.

The key issues our brokers need to be aware of:

 KFI/ESIS – The KFI will be replaced with a new European Standardised Information Sheet (ESIS) or, for an interim period, with a KFI top-up document with new mandatory information.
This includes, for example, the addition of a second APRC to highlight the impact of rate rises by using the high point over the last 20 years.

 APRC – MCD requires the use of an APRC calculation rather than APR. This now includes changes to fees such as valuation fees and redemption fees.

 Foreign currency loans – MCD includes added requirements on lenders where applications are deemed to be foreign currency loans

 Binding offers – Mortgage offers will now become binding on the lender, giving clients a reflection period. The borrower can choose to waive this to speed up their application

 Consumer buy to let – Consumer buy-to-let cases, potentially including inheritance and let-to-buy cases, will now be part regulated.

Barclays and MCD

Here’s how we’re responding to the MCD to ensure we comply with the new legislation.

  • ESIS or a KFI plus

    ESIS or a KFI plus

    We initially chose to use a KFI top-up to keep things simple for you and your clients, and our customers. We've now decided to incorporate the ESIS into our new mortgage information sheet. This helps us ensure we can meet the regulatory deadline.

  • Consumer buy to let

    Consumer buy to let

    While there’s a distinction between consumer buy to let and buy to let in terms of MCD, we’ll continue to offer all products to all customers who meet our lending requirements.
    We’ll incorporate a BTL declaration into our current standard declarations, which means no extra form filling.
    There will, however, be additional questions to establish whether a customer is CBTL or BTL.

  • Pipeline cases

    Pipeline cases

    All cases that were offered prior to us applying MCD will not be affected, but all offers produced thereafter will be MCD compliant. Material changes to existing cases after MCD goes live will also be MCD compliant. We’ve added additional explanatory text to our offer letters and introduced questions to identify foreign currency loans and consumer buy-to-let cases.