It will be easier for citizens to refinance mortgages. A simplified transition to another lender was prescribed by the Saeima, on Thursday, 15 February, in the final reading of the amendments to three laws.
Mortgage refinancing will become easier. When going to another lender, borrowers will no longer have to pay a refinancing fee, nor will it be required to ask for consent to the existing lender. To date, the relatively expensive process of refinancing was one of the factors limiting competition and a reason why people did not move their contracts to other credit institutions. Banks applied a commission for both the granting of a loan and at the moment of refinancing, with additional costs also incurred for notary and land register services, Janis Reirs, Chair of the Budget Committee, which was responsible for the draft law in the Saeima, noted previously.
A study by the European Commission shows that only 2% of the loans from which credit institutions could make a profit are refinanced in Latvia. In other parts of the European Union, this indicator is between 13% and 35%. According to calculations by the Ministry of Economics, previously refinancing in Latvia cost between EUR 400 and 600.
If a person changes the provider of their mortgage loan, the whole process of renegotiating the contract can be carried out remotely, including a confirmation of their signature by a notary regarding the modification of the pledge rights in favour of the new lender. As the members of the Saeima were informed by the Ministry of Economics during the examination of the amendments, the whole process of refinancing will now take no more than two months. It is planned that both lenders will exchange information with each other, but the existing lender will be able to “retain” the borrower for another 10 working days and make a more advantageous offer.
Amendments to the Consumer Rights Protection Law provide for a reduction in costs. The lender may not charge a fee for refinancing, but the fee for drawing up the new loan agreement shall not be higher than 1% of the amount of the new mortgage loan. The consumer will be able to pay it in three instalments.
Given that so far the advertising of loans was significantly restricted, the amendments lifted the advertising ban on mortgage loans, as well as on loans for the construction of real estate or for improving the energy efficiency of homes. This will promote consumer awareness of credit opportunities and lenders’ offers, as well as promote competition in the mortgage lending market, according to the annotation of amendments.
Amendments to the Credit Institution Law provide that the lender will be able to provide undisclosed information about the customer to another lender, if such information will be necessary for mortgage refinancing in order to make an offer to the consumer. The amendments to the Insurance Contract Law in the case of mortgage refinancing confer on the consumer the right to unilaterally terminate the existing real estate insurance contract. The amendments are necessary in order to avoid additional costs.
The legislative amendments will come into force on the day following their announcement.
Saeima Press Service