Foreign currency loans and variable rate loansU.K.
Foreign currency loansU.K.
14.—[F1(1) Where a borrower enters into a buy-to-let mortgage contract that is a foreign currency loan—
(a)either the borrower must have a right to convert the contract into an alternative currency if conditions specified by the creditor are met, or the creditor must put in place other arrangements to limit the exchange risk to which the borrower is exposed under the contract; and
(b)if sub-paragraph (4) applies, the creditor must give the borrower, on a regular basis, foreign currency risk warnings.]
(2) The creditor may specify the alternative currency referred to in sub-paragraph (1)(a), but it must be either—
(a)the currency in which the borrower primarily receives income or holds assets from which the credit is to be repaid, as indicated at the time the most recent creditworthiness assessment in relation to the contract was made; or
[F2(b)pounds sterling.]
(3) Where a borrower has a right to convert the contract into an alternative currency in accordance with sub-paragraph (1)(a), the exchange rate at which the conversion is carried out must be the market exchange rate applicable on the day of application for conversion, unless otherwise specified in the contract.
(4) This sub-paragraph applies if the value of—
(a)the total amount payable by the borrower which remains outstanding; or
(b)the regular instalments,
varies by more than 20% from what it would be if the exchange rate between the currency of the contract and sterling applicable at the time of the conclusion of the contract were applied.
(5) In this paragraph “foreign currency risk warning” means a warning, on paper or on another durable medium—
(a)informing the borrower of a rise in the total amount payable by the borrower;
(b)setting out, where applicable, the borrower's right to convert to an alternative currency and the conditions for doing so; and
(c)explaining any other applicable mechanism for limiting the exchange rate risk to which the borrower is exposed.
Textual Amendments
F1Sch. 2 para. 14(1) substituted (20.9.2015) by The Mortgage Credit Directive (Amendment) Order 2015 (S.I. 2015/1557), arts. 1(2), 2(6)
F2Sch. 2 para. 14(2)(b) substituted (31.12.2020) by The Mortgage Credit (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/656), regs. 1(2), 11; 2020 c. 1, Sch. 5 para. 1(1)
Variable rate creditsU.K.
15. Where the contract provides for variable rate credit, the creditor must—
(a)make any indexes or reference rates used to calculate the borrowing rate clear, accessible, objective and verifiable by the borrower and the FCA; and
(b)maintain historical records of indexes used by the creditor for calculating the borrowing rates.