Financial Services And Markets Citation and Commencement 1 This Order may be cited as the Bank of England Act 1998 (Macro-prudential Measures) Order 2015 and comes into force on 6th April 2015. Interpretation 2 1 In this Order— “ annual income ” means the amount of the annual income (gross or net of tax and national insurance) verified by the lender when deciding to provide credit to the borrower; “ borrower ” means an individual who receives credit; and includes an individual acting jointly with others, and an individual acting as a trustee who receives credit jointly with other trustees; “ cost benefit analysis ” means— an analysis of the costs and benefits of any change in rules made pursuant to Part 9A or section 192XA of the Financial Services and Markets Act 2000 to give effect to a subsequent direction; and where the costs and benefits can reasonably be estimated and it is reasonably practicable to produce an estimate, an estimate of those costs and of those benefits; “ credit ” includes a cash loan, and any other form of financial accommodation; “ debt-to-income ratio ” means the ratio, calculated by the lender when deciding to enter into a relevant mortgage contract, of the borrower's total relevant debt to the borrower's annual income; “ excluded mortgage contract ” means— a mortgage contract— which is offered to a particular class of borrower and not offered to the public generally; which is offered under an enactment with a general interest purpose; and where the terms on which the credit is provided are more favourable to the borrower than those prevailing on the market, because it meets one of the following conditions— it is interest free; the rate of interest is lower than that prevailing on the market at the date when the credit is provided; the rate of interest is no higher than that prevailing on the market at the date when the credit is provided, but the other terms on which credit is provided are more favourable to the borrower; a mortgage contract where the agreement is entered into by the borrower, or by a trustee on behalf of a beneficiary, wholly or predominantly for the purpose of a business carried on, or intended to be carried on, by the borrower or beneficiary; or a remortgage; “ FCA ” has the meaning given by section 1A of the Financial Services and Markets Act 2000 ; “ Financial Policy Committee ” has the meaning given by section 9B of the 1998 Act ; “ lender ” means a person providing credit by way of business; “ loan-to-value percentage ” means, in relation to a provision of credit by a lender to a borrower, the aggregate amount of outstanding credit provided under all relevant mortgage contracts relating to the same land immediately after the last amount of credit is provided, as a percentage of the total value of the land as assessed by the lender for the purposes of deciding to provide credit to the borrower; “ mortgage ” includes a charge and (in Scotland) a heritable security; “ mortgage contract ” means a contract under which— the lender provides credit to the borrower; the obligation of the borrower to repay is secured by a mortgage on land whether or not in the United Kingdom; and at least 40% of that land is used, or is intended to be used, as or in connection with a dwelling by the borrower or (in the case of credit provided to trustees) by an individual who is a beneficiary of the trust, or by a person who is a related person to the borrower or a related person to the individual who is the beneficiary of the trust; “ PRA ” has the meaning given by section 2A of the Financial Services and Markets Act 2000 ; “ regulated persons ” has the meaning given by section 9H(2) of the 1998 Act ; “ related person ” means, in relation to a borrower, or in the case of credit provided to trustees, a beneficiary of the trust — that person's spouse or civil partner; a person (whether or not of the opposite sex) whose relationship with that person has substantially the same characteristics of a relationship between husband and wife or between civil partners; or that person's parent, brother, sister, child, grandparent or grandchild; “ relevant credit agreement ” means— a credit agreement within the meaning of article 60B(3) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 , but excluding a relevant mortgage contract and the types of agreement described in articles 60D , 60F(5) and 60F(6) , 60G(3) and 60G(4) of that Order; and a consumer hire agreement within the meaning of article 60N(3) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, but excluding the type of agreement described in article 60P of that Order; “ relevant mortgage contract ” means a mortgage contract other than an excluded mortgage contract; “ remortgage ” means a mortgage contract under which the amount of credit provided by the lender to the borrower does not exceed that outstanding to the lender, or to a different lender, under: a previous mortgage contract; or any other type of contract under which the obligation to repay the credit is secured by a legal mortgage which relates to the same land; “ the 1998 Act ” means the Bank of England Act 1998; “ total relevant debt ” means the total amount of outstanding credit provided to a borrower pursuant to— any relevant credit agreement; and any relevant mortgage contract. 2 For the purposes of assessing the amount of credit provided under a remortgage contract, the lender may disregard a reasonable sum in respect of any of the following fees or costs— a arrangement fees; b professional fees and costs; c redemption fees for redeeming a previous mortgage contract which relates to the same land; d administration costs. 3 Any reference to ‘specified’ in the first column of the table in article 3 of this Order means specified by the Financial Policy Committee in a direction made under section 9H of the 1998 Act by reference to this Order. Macro-prudential measures 3 The measures listed in the first column of the table (and any measures falling within a listed measure) are prescribed in relation to the regulator specified in the second column of the table. Macro-prudential measure Regulator A measure to require regulated persons who enter into relevant mortgage contracts to ensure that no more than a specified proportion of relevant mortgage contracts entered into after the date of a direction made with reference to this order have a loan-to-value percentage greater than the maximum loan-to-value percentage specified in the direction. PRA or FCA A measure to require regulated persons who enter into relevant mortgage contracts to ensure that no more than a specified proportion of relevant mortgage contracts entered into after the date of a direction made with reference to this order have a debt-to-income ratio greater than the maximum debt-to-income ratio specified in the direction. PRA or FCA Disapplication of procedural requirements 4 1 Paragraph (2) applies if— a the Financial Policy Committee has given a direction to the PRA or the FCA under section 9H of the 1998 Act which specifies a loan-to-value percentage or a debt-to-income ratio (“the first direction”); b the Financial Policy Committee subsequently revokes the first direction; and c within a reasonable period of time after the revocation of the first direction, the Financial Policy Committee gives another direction to the PRA or the FCA under section 9H of the 1998 Act (“the subsequent direction”) which is in substance identical to the first direction except in relation to the values specified in the direction. 2 To the extent that the subsequent direction is implemented by way of rules pursuant to Part 9A or section 192XA of the Financial Services and Markets Act 2000 then— a sections 138I, 138K, and 139A(3) of the Financial Services and Markets Act 2000 do not apply to the FCA, but the FCA must undertake and publish, at the same time as the subsequent direction is implemented, a cost benefit analysis relating to changes implemented pursuant to the subsequent direction; and b sections 138J and 138K of the Financial Services and Markets Act 2000 do not apply to the PRA, but the PRA must undertake and publish, at the same time as the subsequent direction is implemented, a cost benefit analysis relating to changes implemented pursuant to the subsequent direction. Review 5 1 The Treasury must from time to time— a carry out a review of the regulatory provision contained in this Order, and b publish a report setting out the conclusions of the review. 2 The first report must be published before the end of the period of five years beginning with the day on which this article comes into force. 3 Subsequent reports must be published at intervals not exceeding five years. 4 Section 30(4) of the Small Business, Enterprise and Employment Act 2015 requires that a report published under this article must, in particular— a set out the objectives intended to be achieved by the regulatory provision referred to in paragraph (1)(a); b assess the extent to which those objectives are achieved; c assess whether those objectives remain appropriate; and d if those objectives remain appropriate, assess the extent to which they could be achieved in a way which involves less onerous regulatory provision. 5 In this article, “regulatory provision” has the meaning given in sections 28 to 32 of the Small Business, Enterprise and Employment Act 2015 (see section 32 of that Act). Mark Lancaster Gavin Barwell Two of the Lords Commissioners of Her Majesty's Treasury