EU WILL FORCE UP MORTGAGES
Now meddlers in Brussels target UK homeowners
HOMEOWNERS may have to fi nd thousands of pounds more to meet their mortgage payments because of new EU rules.
Brussels bureaucrats meddling in the UK housing market will make it harder for borrowers to switch lenders and fi nd cheaper deals.
The EU intervention sparked outrage last night with one expert questioning if the move was deliberate or sheer “incompetence”.
Last year Britain’s Mortgage Market Review tightened lending restrictions but homeowners seeking to re- mortgage as their current deals came to an end were exempt.
A new EU Mortgage Credit Directive, coming into force next March, will extend the strict new affordability tests to all existing borrowers unless they stay with the same lender.
But banks and building societies will be under no obligation to offer their best deal. A typical example could see borrowers having to move from a 1.18 per cent rate to 2.04 per cent. On a £ 250,000 mortgage this could send payments soaring by more than £ 1,000 a year. Meanwhile,
those who try to switch to a lower rate offered by a rival risk being turned down because the criteria will be much harder to meet than when they first took out a home loan.
Paul Winter, chief executive of Ipswich Building Society, said: “People will be angry that the EU is dictating how much they can borrow within the UK. This is one of the first times Brussels has had a direct impact on the personal finances of British homeowners.”
Alex Gosling, of online estate agents House-Simple, said: “The last thing the UK property market needs is more red tape and particularly EU red tape.
“The impact of the Mortgage Market Review is still being felt almost a year after the tighter lending restrictions came into force.
“But at least the review was carried out by the Financial Services Authority which you feel confident has a good understanding of the UK mortgage market and UK borrowers.
“I doubt there will be the same confidence in regulators in Brussels understanding or even caring about the impact any directive will have on the British homeowner.”
Worse
Ray Boulger, of mortgage brokers John Charcol, said: “I don’t know whether the EU has just been incompetent in drafting these rules or actually wants consumers to have worse outcomes, but it has to be one of these.”
He said the directive could affect hundreds of thousands of people, adding: “It makes no sense to force responsible homeowners to pay more than they did before in an environment where we are trying to reduce risky borrowing.”
Bernard Clarke, of the Council of Mortgage Lenders, said: “The benefits of the directive to consumers are minimal. Borrowing rates are currently at a historic low point and we do not think that what the directive delivers for consumers justifies the higher costs they could end up paying.”
Luke Stanley, of the Eurosceptic grassroots campaign group Get Britain Out, said: “This latest intrusion by Brussels into the lives of the Great British Public shows how indefensible the EU’s ‘ one- size- fits- all’ approach to policy making is.
“Because the Eurocrats either don’t know or don’t care that the Englishman’s home is his castle, this badly thought out diktat will seriously hit hard- working home- owning families in Britain.
“If we get Britain out of the EU, we will be able to ensure all British government policies are made in the best interests of the British people, not the interests of 450 million people who don’t live here.”
Many borrowers forced to stay with their existing lender under the new rules will find they are not eligible for the best mortgage rates, having to pay significantly higher interest each month.
Miles Shipside, Rightmove’s housing market analyst, said: “Getting your financial house in order looks like it’s going to be even more important.
“Ironically by denying hard- up borrowers the option to take advantage of cheaper rates with other lenders, they are creating the potential for more financial instability if some end up defaulting and being repossessed due to having to pay more for their mortgages.”