The importance of simple, fair and up-to-date information in the digital era:
UIPI's Position on EC mortgage credit initiative
Accessibility of credits agreements related to real estate property is a topic of high relevance for our members, whether they buy property for the first time or want to expand their real estate portfolio. Yet, the legal framework concerning mortgages is embedded in a delicate and constantly evolving balance between economic considerations and transparent information. UIPI considers important that any EU initiative on the matter is focused on tackling the new challenges of our changing society, in particular as regards digital, financial and consumer-rights transformations.
End of 2021, the European Commission has launched a consultation phase on Mortgage credit – review of EU rules, with the aim to issue a proposal of revision of the Mortgage Credit Directive (MCD) by fourth quarter 2022.
This initiative mainly aims to update the MCD regarding the emergence of new types of market actors and products that are being developed and may not be adequately covered by the current scope of the directive. The lack of clear rules may indeed pose a risk in terms of consumer protection, and a general need to strengthen the support of consumers at risk of default or becoming over-indebted seems to emerge. Moreover, according to the Commission, overly detailed and complex information on mortgages have proven not to be suited to digital delivery, and the rules on the cross-border provision of mortgages are still insufficient.
In its contribution to the consultation process, UIPI Secretariat underlined that the new MCD should focus on a more dynamic approach through a less prescriptive regulation of the European Standardised Information Sheet (ESIS), with the aim to improve the communication with consumers. On the same line, clarity and transparency should be the guiding principles of the increasing cross-border market of mortgage loans. It must be kept in mind that loans from foreign countries’ lenders are not an end in themselves and can give a positive contribution to the mortgage market only if they provide a benefit for both lenders and borrowers without unacceptable risks for the borrower, as a wider choice does not always correspond to a more informed one.
We also encourage carefulness when expanding the MCD’s scope, in particular in relation to the inclusion of reverse mortgages. Reverse mortgages usually represent a quite costly combination of different types of services and are often difficult to understand for the average consumer, in particular for elderly people. Therefore, we deem it useful that the MCD’s revision includes specific considerations on reverse mortgages to protect consumers and to avoid the misuse of this tool.
Finally, we made some considerations on the opportunities and risks linked to green mortgages. A common framework to address possible distortions would be welcome, as the major preoccupation for us is that homeowners living in older, rural and worst class-rated properties are unable to neither improve nor sell their assets if strict green finance targets are introduced.
The consultation period closed in February 2022 and the publication of the proposal is planned for the Q4 2022. UIPI will continue monitoring the developments of the file and participating to the discussions at EU level.
