Under current rules, UK mortgage lenders who are subject to EMCD have until 2019 to complete the transition to the new ESIS illustration standard.
Whilst some providers decided to bite the bullet and make the change as part of their wider EMCD projects earlier this year, most have adopted the halfway house option of topping up their existing KFIs with additional information, including the controversial ‘20 year high’ interest rate stress test.
Now that the UK has voted to leave the EU, those lenders who have implemented the ESIS in full must be wondering how long it will be before they are told to unpick their hard work and revert to the KFI.
Second charge lenders are potentially affected to a greater degree: not only were they all required to adopt the ESIS in full by March this year, but they don’t have a KFI to go back to, having not previously been regulated under MCOB.
Meanwhile the vast majority of lenders who have implemented the KFI top-up are no doubt speculating as to whether they might be excused from implementing the ESIS at all.
The FCA’s mandate to implement EMCD across the industry derives from an Act of Parliament, and only fresh legislation could overturn or alter that. This seems unlikely, particularly given the vast number of other laws that will need to be passed as part of Brexit.
The new government is clearly in no hurry to invoke Article 50 and trigger the two-year exit process, and all indications are that the 2019 deadline for implementation of the ESIS will come to pass long before they have a chance to repeal the relevant laws. This is not necessarily a bad thing: after so much regulatory upheaval in recent months, a period of calm may actually be welcomed.
It seems the real winners in all of this are the Equity Release lenders: since Lifetime Mortgages are exempt from EMCD, it’s business as usual for them with the trusty KFI.