What does this mean to you?

The Mortgage Credit Directive (MCD) is an EU wide initiative that aims to create a union wide mortgage credit market with a high level of consumer protection. It’s closely aligned with existing mortgage regulations, however there are a few changes to highlight.

When will we implement MCD?

We fully implemented the MCD rules onThursday 14th January, 2016. This will ensure that all of the Mortgage Offers in our system are MCD compliant going forward.

KFI+ or European Standardised Information Sheet (ESIS)

Part of the directive is that lenders will be required to replace the Key Facts Illustration (KFI) with a European Standardised information Sheet (ESIS) by 21st March 2019. Until then lenders can use an enhanced KFI, known as a KFI+, which includes additional disclosures.

The Nottingham will use the KFI+ from 14th January, 2016.  You will automatically receive a KFI+ when using our Online Trading service to obtain illustrations/AIPs and submit applications.

Mortgage Offers will continue to look similar to now, with the addition of further disclosures required for the KFI+.

What are the changes?

Binding Mortgage Offers and a reflection period

Under MCD we are required to provide a binding Mortgage Offer with a seven day reflection period.  

We consider a Mortgage Offer to be binding on us, and open to acceptance by the applicant, from the date the applicants receive the Mortgage Offer. It may still be withdrawn if specific situations materialise. Our reflection period will apply for eight working days from the date the Mortgage Offer is produced.   

The Mortgage Offer is deemed to be accepted by the applicant when The Nottingham receives the COT (Certificate of Title) from the Solicitor requesting the release of funds, thereby creating the binding agreement between The Nottingham and the applicant.

What if your application is in the pipeline on 21st March 2016?

All business submitted from today will not require any further action.

For all applications submitted before Thursday 14th January 2016, we will aim to issue a Mortgage Offer by 20th March, 2016.

During March we will be in contact with those advisers with applications submitted before 14th January, which are unlikely to be progressed to a Mortgage Offer by 20th March, as these applicants will need to go through an MCD compliant process.

Will foreign currency mortgages be offered?

There will be no changes to our current criteria. We do not currently offer foreign currency mortgages, or assess foreign income when calculating an applicants’ borrowing ability, nor do we use foreign assets as an acceptable repayment vehicle for interest only loans.

Changes to Buy to Let mortgage definitions

Outside of MCD, further HMT changes are also being made from 21st March, 2016 to the definition of BTL loans, which will be referred to as either Consumer BTL (CBTL) or Investment Property Loans (IPL).

CBTL will apply to re-mortgage applicants who don’t own any other let properties and either:
  • wish to let their current residence while purchasing a new home(known as Let to Buy)
  • have inherited the property and wish to let it 
  • have themselves, or a close relative, previously resided in the property, and now wish to let it.
IPL will apply to anyone:
  • purchasing a property specifically to let
  • re-mortgaging an existing rental property
You will be required to confirm to us which type of BTL mortgage you are submitting. This will be done within the Application Manager system, by selecting the correct option. Our BTL decision tree may help you in making your decision

All advisers submitting a CBTL application will need to hold the relevant CBTL FCA permissions in addition to their normal mortgage permissions.

The way we assess BTL cases, and the choice of products on offer, will be the same for both CBTL and IPL.

Note: We do not currently accept MCOB regulated BTLs (e.g. where an applicant is letting the property to family members).