Agreement has been reached between the Irish presidency, the European Parliament and the European Commission on the new Mortgage Credit Directive.
This directive is a step closer to a unified set of standards to apply to lenders and borrowers alike. The European commission are heralding the agreement as giving greater protection and transparency for customers.
The EU wide directive will toughen the checks on the credit worthiness of potential borrowers as well as a standardized information sheet (ESIS) so customers may compare banks and credit institutions products from across Europe easily. The information sheet will also alert customers to risks involved in products; such as variable rate loans and foreign currency loans.
The directive will put a stop to misleading advertising, while also preventing lenders for taking excessive risks in providing loans in the persuit of bonuses or commission.
Borrowers will be guaranteed a cooling off period, or period of withdrawal, before being bound by a contract.
Banks and credit institutions will also have to show “reasonable forbearance” when dealing with borrowers who are experiencing serious difficulty in making repayments.
Unfortunately these principles will only apply to mortgages issued after the directive comes into force, which is expected to be in the middle of 2015.
The directive is in place as a measure to prevent instances such as the housing bubble of 2008 from happen again. A proactive stance is being taken to unsure a secure future for borrowers and lenders alike.