Mortgages Directive agreement

Scofflaw

They appear to have reached agreement on a Mortgages Directive, which will cover:

The Mortgage Credit Directive (Directive on credit agreements relating to residential immovable property – see IP/11/383 and MEMO/11/205) will introduce for the first time European-wide standards for the conduct of the credit worthiness assessment in the mortgage credit area. Where the result of such assessment is negative, the creditors will no longer be allowed to hand out mortgage credits.

The Directive will not only put a brake on the excesses of the past, but will also offer the mortgage credit providers new opportunities to take full advantage of the Single Market with its 500 million consumers. Provided that credit intermediaries are properly authorised, registered and supervised at national level, they will receive a European passport and can look for new business opportunities in any of the 27 Member States.

But above all, the new Directive will include a number of important elements that go beyond a mere crisis response, for the benefit of consumers:

Creditors will be obliged to hand out to consumers a standardised information sheet (ESIS) that will allow them to shop around to identify the best and cheapest credit offer for their needs.

The ESIS will be user-friendly and will also include detailed information on the characteristics of the loan on offer. Consumers will, for instance, be alerted to the risks associated with the offer, e.g. in relation to variable rate loans and foreign currency loans.

Measures against misleading advertising will also introduced.

Mortgage credit providers will also need to respect high-level principles in their direct contacts with their clients, such as taking account of the consumer’s real interests, ensuring that the remuneration structures do not incite excessive risk taking, and disclosing any links between the credit intermediary and the creditor.

Concrete performance quality standards for staff will also be introduced (e.g. obligation for staff to possess the appropriate knowledge and competences in fields identified, obligation to provide adequate explanations at pre-contractual stage, standards for advisory services).

Consumers will also profit from more competition through a general ban on tying practices. Tied mortgage products that have proven to be beneficial to consumers in the past (e.g. some insurance or savings products) or future products that will be assessed positively will still be allowed.

The Directive will grant consumers a general right to repay their loans early. Member States will have the choice to impose that in such cases creditors should receive a fair compensation.

Consumers will benefit from a guaranteed period of time before being bound by an agreement for a mortgage (through a period of reflection, a right of withdrawal, or both).

Property valuations, if conducted, will need to respect principles in line with the Financial Stability Board.

The Directive will also require creditors to apply reasonable forbearance when being confronted with consumers in serious payment difficulties.

Much effect in the Irish market likely?

cordially,
Scofflaw

Sleepy

As someone who aspires to getting a mortgage in 4/5 years time this sounds like good news to me. I've no interest in borrowing more than I should and would welcome the opportunity to take advantage of more competition e.g. if lower overheads in Germany, for example, mean I can borrow at a lower interest rate from a German bank, I'd have no qualms whatsoever about taking a mortgage with them over Bank of Ireland /AIB.

Assuming other first-time buyers have similar thoughts, I can see this having a fairly detrimental effect on the Irish banks tbh.

antoobrien

Scofflaw wrote: »

Much effect in the Irish market likely?

I'd be concerned, the entry of HBOS into Ireland was one of the drivers of the explosion of cheap credit. The new rules will have to be iron clad & straitjacket like in order to prevent a boom - even a localised one - from happening again. We all know how good Europe is at applying rules across the board...

murphaph

Sleepy wrote: »

As someone who aspires to getting a mortgage in 4/5 years time this sounds like good news to me. I've no interest in borrowing more than I should and would welcome the opportunity to take advantage of more competition e.g. if lower overheads in Germany, for example, mean I can borrow at a lower interest rate from a German bank, I'd have no qualms whatsoever about taking a mortgage with them over Bank of Ireland /AIB.

Assuming other first-time buyers have similar thoughts, I can see this having a fairly detrimental effect on the Irish banks tbh.

It'll take more than this directive to entice German banks to lend into the Irish market IMO.

The German rates on home loans for fixed periods of 20 years + are incredibly low compared to Irish fixed rates (you can't even get such long term fixed rate products in Ireland). This is because German mortgage defaulters get their homes taken off them without fanfare. There is no special protection for the family home BS.

Therefore, the risks are low for the lender and in Germany the money often comes from longer term financing life life assurance, rather than bank deposits. Life assurance companies invest in mortgage companies and take the low rate returned because it is almost guaranteed.

As we are seeing, this is far from the case in Ireland where repaying your mortgage appears optional for many and repossessions are not happening. This needs to change before you'll ever get 3.5% fixed for 20 years in Ireland.

AlekSmart

murphaph wrote: »

It'll take more than this directive to entice German banks to lend into the Irish market IMO.

The German rates on home loans for fixed periods of 20 years + are incredibly low compared to Irish fixed rates (you can't even get such long term fixed rate products in Ireland). This is because German mortgage defaulters get their homes taken off them without fanfare. There is no special protection for the family home BS.

Therefore, the risks are low for the lender and in Germany the money often comes from longer term financing life life assurance, rather than bank deposits. Life assurance companies invest in mortgage companies and take the low rate returned because it is almost guaranteed.

As we are seeing, this is far from the case in Ireland where repaying your mortgage appears optional for many and repossessions are not happening. This needs to change before you'll ever get 3.5% fixed for 20 years in Ireland.

I suspect that there'll be much made of the German Banking system being "reluctant to come to the aid" of the reinvigorated new Irish borrower.

Just when a brand new generation of young Irelanders are lining up to step onto the Property Ladder,them prudish Lutheran Germans just won't open their purses....sigh

The issue however is,in essence,far simpler and revolves around what value we ascribe to Residential Property relative to the other areas of our lives.

Is this Home Ownership to be the holy-grail,eclipsing all else,and made with the full knowledge that the Home OWNER will be sacrificing one or more other aspects of a fulfilling life to attain?

I still see no sign that the Irish pfennig has dropped as yet.

It's little wonder the Irish domestic banking sector never offered the Long-Term,Fixed-Rate product as so few of its movers and shakers were able to accept Long-Term as meaning YEARS,rather than the Buy Today,Flip Tomorrow,Buy Again next Week and continue until your a Millionaire scenario which so enraptured a (now lost) generation of 41-64 year old's :eek: