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“For most families, a mortgage is the biggest and longest financial commitment they make. So we need these rules to drive progress towards an EU-wide mortgage market that is stable, integrated, and above all sustainable, with a high level of consumer protection, good information and balanced relations between lenders and borrowers”, said lead MEP Antolin Sanchez Presedo (S&D, ES).
MEPs endorsed the deal struck with EU Member States because they are satisfied that the European Banking Authority will be able to investigate an alleged breach of the rules, or failure to implement them, and ask the competent authorities in the member states for any information enabling it to do so.
The legislation will cover mortgages on residential property, residential property including an office space and building land.
The measures were approved by 596 votes to 31, with 65 abstentions.
Commission webpage on Mortgage Credit
EuroparlTV Video - Home buyer rights repossessed
Commissioner Barnier welcomed the EP's adoption of the new rules on mortgages, saying:
"The European Parliament has today confirmed its willingness to make the mortgage credit sector subject to improved consumer protection measures at EU level by approving new rules on mortgages. Consumers have lost trust in the financial sector: these new rules will help rebuild that trust.
I welcome this important step towards strengthening consumer protection in the financial services area and towards completing the Single Market and I would like to thank the rapporteur, Antolín Sánchez Presedo, for his hard work on this file. I hope that the Council will now formally adopt the text so that the new rules will benefit consumers without delay.
Too often consumers took out mortgages without being fully aware of the risks they were exposing themselves to. When the crisis hit, many found it hard to meet their obligations and ended up losing their homes with the terrible consequences that entails. The consequences for the economy at large have also been serious.
The aim of the Mortgage Credit Directive is to make responsible mortgage lending the norm across Europe. The purchase of a property entails substantial costs which are often financed by a mortgage. Mortgages account for the entire outstanding debt of two-thirds of European households.
This Directive introduces responsible lending practices across the EU. Consumers will be better informed as lenders will have to provide them with a standardised information sheet so they know the risks but can also shop around for the best product at the best price to suit their needs. It ensures that vulnerable consumers are protected by reducing the risk of over-indebtedness and default. Creditors will be encouraged to apply reasonable forbearance when confronted with consumers in serious payment difficulties.
It will also, in the long run, provide lenders with new business opportunities through the creation of a Single European Mortgage Market. Credit intermediaries that comply with the new business conduct rules will gain access to many more potential consumers in the single market via the passport regime. This will result in more EU-wide competition and is expected to drive down prices in the long run."
EACB pleased with the adoption of the Mortgage Credit Directive - the individualised approach of co-operative banks in provision of mortgages continues to play a decisive role
The European Association of Co-operative Banks (EACB) welcomed the vote on the EP Resolution regarding the Directive on credit agreements for consumers relating to residential immovable property (CARRP). Co-operative banks are retail and local oriented, they are key provider of mortgages for households at EU level.
With regard to the outcome of the resolution on CARRP, the EACB considers that a balanced approach has been found; the EACB finds it positive that the approach taken with regard to the creditworthiness assessment refrains from becoming all too prescriptive. Consumers retain the possibility to continue selecting the product that suits best for them from a wide range of alternatives, e.g. they can choose between fixed or variable interest rates.
Hervé Guider, General Manager of the EACB, stated: “Co- operative banks are committed to an individualised approach to the credit granting process. It is in the interest of each co-operative bank to ensure that the borrower will be able to repay the loan, given the very nature of funding of co-operative banks- coming for an important part from their client/members.” Indeed, in addition to the legal requirements of the adopted Mortgage Credit Directive, co-operative banks use their proximity to the clients, often being also members, to carefully analyse the financial situation of each client.