Controversial new EU mortgage rules that will bombard borrowers with even more ‘useless and confusing’ information is on its way from Brussels.
The ‘Mortgage Credit Directive’ will make lenders display worst case scenarios to borrowers taking on a loan. This involves each lender listing the maximum interest rate it has charged over the last 20 years, even though this has no bearing on its current interest rates. The figure must be displayed as prominently as other rates. Already lenders have to quote an ‘indicative’ annual interest rate which is an APR based on the company’s standard variable rate and this requirement will remain. Yes of course any mortgagor should be reminded that interest rates will go up at some stage but there are better ways of doing this than yet more figures, especially ones of such little immediate relevance. From next April, banks and building societies will be required to ‘stress test’ every mortgage application to try and ensure that borrowers can cope with an interest rate hike. The test will be based on market expectations of interest rate moves over the next 5 years. Sounds sensible? The new EU rules, which are expected to come into force in mid 2015, should really confuse the borrower.
The above is the lead article in our monthly News Notes. Please click here for information regarding these notes.