Buyers to be warned of mortgage ‘worst case scenarios’
The EU wants lenders to provide homebuyers with more information about their mortgages, including “worst case scenarios” of what could happen if rates increase unexpectedly.
The EU wants lenders to provide homebuyers with more information about their mortgages, including “worst case scenarios” of what could happen if rates increase unexpectedly.
It means lenders will have to show the maximum interest rate they have charged in the last 20 years.
A statement from the European Parliament says: “Anyone signing up for a mortgage in the EU should receive comparable information about the products available, and understand the total cost and long-run financial consequences of taking out the loan. Credit terms offered to borrowers would have to match their current financial situation and take account of their prospects and possible downturns.”
The final details are still being worked out but it’s thought the new rules won’t apply to fixed-rate mortgages of more than five years.
The proposed changes have been criticised by some financial commentators who fear buyers will be confused rather than reassured. However, the Council of Mortgage Lenders said that the new rules will broadly suit the UK market and are unlikely to cause any problems.
It said: “UK customers already receive significant consumer protection and information as our regulatory regime is already the most advanced among European member states, but for customers in some other member states the changes will result in increased protection and greater consistency.”
The EU Mortgage Credit Directive has been given provisional approval by the European Parliament and is expected to come into force within two years.
Please contact us if you would like more information about the issues raised in this article or any other matters relating to buying or selling a property.
