The European Parliament has given its final backing to a law setting EU-wide standards on mortgages.
The move has been welcomed by Labour MEP for Ireland South, Phil Prendergast.
“This new legislation covering mortgages on residential property means that home buyers who take out a loan will be better protected under common, EU-wide standards.
“This is an issue the EU started looking into right before the financial crisis came to a head in 2008, and the damage done to mortgage holders in the wake of the housing bubble collapse validates the need to tighten the rules in the home buyers’ interest.
“At the height of a culture that pushed families to ever more expensive credit-fuelled solutions to their housing, mortgages are an overwhelming and long-lasting financial commitment that eats into most of their available income.
“Crucially, we have introduced a provision allowing for mortgage contracts where the return of property will suffice to pay the loan.
“Without this, all borrowers in negative equity can find themselves stuck in what I can only compare to debt peonage in feudal times,” she said.
“In case of default, lenders must also help prevent situations of long-term over-indebtedness by trying to sell the property at the best possible price and facilitating debt repayment in accordance with borrowers’ circumstances.
“Prospective borrowers must be offered comparable and easily understood information about the loans available, as well as credit terms that meet their present and foreseeable financial situation.
“Borrowers will be also entitled to a mandatory, 7-day reflection period prior to signing a loan, or an equivalent right of withdrawal.
“Early repayment will also be made easier and more flexible, whilst the imposition of early payment penalties will be banned.
“Loans taken in a foreign currency can be made less risky thanks to the possibility to change the currency at a fixed exchange rate to be agreed on the contract.”