Mortgage customers in the UK today received a huge boost as the EU announced rules which will force lenders to be far more transparent with their mortgage packages.
Lenders will be forced to issue clear and concise information packs to borrowers across the UK and Europe in changes aimed at avoiding a repeat of the mortgage arrears crisis the EU finds itself in.
The sheets will have to provide easy to understand language, and a summary of all of the mortgages terms, and will force lenders to allow borrowers to pay off their mortgages early.
EU internal market and services commissioner, Michel Barnier said, “Lenders and intermediaries alike engaged in irresponsible practices, and consumers were not warned of the consequences of their decisions.”
“The draft set of rules presented today is designed to ensure a high standard of pre-contractual information and improved lending practices across Europe, while promoting a dynamic, competitive and more integrated single market for mortgage credit,” he added.
The proposals have come at a time when experts are warning that there could be further financial trouble hidden in the mortgage market, as people who took out 100% mortgages find themselves falling further into negative equity, and an increase in interest rates could see them fall into arrears.
The FSA last week pointed out that mortgage forbearance could be a future problem for the industry. Forbearance see’s lenders altering the terms of the loan to help people service their debts.
Two people are in forbearance in the UK for every one in arrears, and Moody’s. The credit ratings agency argued that this could lead to huge losses for the banks if these people become unable to keep up their mortgage repayments.