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European Commission


Brussels, 10 December 2013

Commissioner Barnier welcomes the European Parliament’s adoption of new rules on mortgages

"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."


The Directive on Credit Agreements Relating to Residential immovable Property (CARRP) is referred to as Mortgage Credit Directive (MCD).

The main objectives of the new rules are following:

1. Better information, more time to decide, heightened credit worthiness assessment standards

Consumers will be better informed, so they can choose the mortgage product which best meets their needs. Lenders will have to provide them with a standardised information sheet (ESIS) which will allow them to shop around to identify the right product for them. To alert consumers to potential rate variations, the ESIS will also include worst-case scenarios as far as variable interest and foreign currency loans are concerned. Borrowers 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). To ensure that borrowers can meet their credit obligations, the MCD will introduce Europe-wide standards for assessing the credit worthiness of mortgage applicants.

2. Business conduct rules

Lenders and credit intermediaries will be obliged to respect high-level principles in their direct contacts with clients. This means ensuring that the way they are paid does not prevent them from taking account of the consumer’s interests or disclosing any links between the credit intermediary and the creditor. Performance quality standards for staff will also apply. That means staff will have to have the appropriate knowledge and competence in fields identified, and be obliged to provide adequate explanation at the pre-contractual stage. There will also be standards for advisory services.

3. Early repayment

The Directive will grant consumers a general right to repay their loans early, thereby benefiting from a reduction in the total remaining cost of the mortgage. However, Member States may decide that in such cases, creditors are entitled to fair compensation for costs directly and exclusively linked to early repayment.

4. Passport regime for credit intermediaries

The Directive establishes principles for the authorisation and registration of credit intermediaries and establishes a passport regime for those intermediaries. This means that once authorised in a Member State, a credit intermediary will be allowed to provide services throughout the Single Market. This process is based on a number of conditions: credit intermediaries have to maintain an appropriate level of knowledge and skills, to hold professional indemnity insurance and to be of good repute.

5. Arrears and foreclosures

The Directive also encourages lenders through high-level principles to apply reasonable forbearance when being confronted with consumers in serious payment difficulties.

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