European Parliament Members voted through a draft directive on Thursday which included a proposal to link all variable rates to a reference rate.
In the UK such a reference rate would be the Bank of England’s Base Rate.
Whether it was the intention of MEPs to capture SVRs under the proposal is currently unclear however Mortgage Introducer understands that in its current wording, UK lenders will have to attach their SVRs to Bank Base Rate.
The amendment says that where a credit agreement is a variable rate loan: Member states shall ensure that any reference rate used to calculate the borrowing rate is clear, accessible, objective and verifieable by all parties involved in the agreement.
Such legislation would deny lenders the ability to hike their SVRs without clear justification and they would need to link it to an external reference rate.
A spokeswoman from the Council of Mortgage Lenders said that such legislation would make lending in the UK far more complex and much more difficult.
The EU Economic and Monetary Affairs committee voted through draft proposals today which included several late amendments.
