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Mortgage Credit Directive

The Mortgage Credit Directive comes into effect on 21 March 2016. The following is a summary of a number of the key elements and principles in this new Directive.

What is the Mortgage Credit Directive?

The Mortgage Credit Directive comes into effect in Ireland and across Europe on 21 March 2016. It requires mortgage lenders to continue to ensure their prospective customers benefit from only the highest levels of protection. The majority of lenders in Ireland have already been applying many of the requirements contained in this new Directive.

With the implementation of the Mortgage Credit Directive, the prescribed European Standard Information Sheet (ESIS) will include some new information such as:

  • an explanation and outline of the reflection period – see below;
  • the Annual Percentage Rate of Charge (APRC) -which replaces the historical APR calculation;
  • an additional illustrative APRC, where the interest rate is variable;
  • confirmation regarding the status of advisory services; and
  • foreign currency loan information, where applicable.

The objective of the ESIS is to ensure that consumers have sufficient information in good time prior to the conclusion of the credit agreement and before they are bound by the mortgage loan offer. The intention is that during this time they may compare different mortgage loan offers received.

Further information on the Mortgage Credit Directive is available on the European Commission website.

General Principles of the Mortgage Credit Directive

  • Customers will receive their ESIS with the binding loan offer.
  • Customers are allowed a reflection period within which time they may compare offers, assess offer implications, obtain third party advice (if necessary), and make an informed decision on whether to accept an offer. This reflection period must be of a minimum 30-day duration.
  • A Binding Offer can be withdrawn in limited circumstances, such as if:
    • there’s a material change to financial or personal circumstances, or a change in the property value or in the status of the title;
    • in line with current practice, where material information was withheld or false information has been provided by the consumer.
  • The Directive will introduce a new category of Foreign Currency Loans which will effect how mortgages are defined, processed and managed:
    • as an example, where a borrower lives and purchases a home in one country in Euro but works in another country and is paid in Danish Kroner, that will be considered a Foreign Currency Loan under the Directive
    • the individual Lending Policy of a Bank may not support certain foreign currency lending to new borrowers.

For more information please see the website of your mortgage lender.