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From 21 March 2016 second and subsequent charge mortgage contracts fell under the definition of a regulated mortgage contract.
This change is part of the United Kingdom’s implementation of the Mortgage Credit Directive (MCD), which applies equally to first and subsequent charge mortgages. The Prudential Regulation Authority’s (PRA) rules, which implement a Financial Policy Committee (FPC) recommendation, place a loan to income (LTI) flow limit on regulated mortgage contracts.
Hence, the implementation of the MCD means that the LTI flow limit would have automatically applied to second and subsequent charge mortgage contracts, which are currently exempted from the LTI flow limit.
This policy statement is relevant to banks, building societies, friendly societies, industrial and provident societies, credit unions, PRA-designated investment firms, and overseas banks in relation to their UK branch activities.
The rules also continue to require the above firms to apply the rules at UK subsidiary level in relation to firms not already caught by the rules.