FOLLOWING many years of ‘devious’ practices by financial institutions and intermediaries throughout EU member states, the Mortgage Credit Directive sets out common standards to enhance the protection of consumers taking out loans to buy residential property.
The Directive, which has taken nearly twelve years of negotiation to come to fruition, is designed to ensure that borrowers have all the relevant information that will enable them to make informed decisions when reviewing the terms and conditions of a loan offer. It also requires financial institutions to undertake creditworthiness checks on potential borrowers before granting a loan.
The Directive includes a ‘European Standardised Information Sheet’ (ESIS); a five page form that lenders are required to complete free of change enabling borrowers to compare loan products from different lenders tailored to their specific requirements.
The ESIS explains the terms and conditions of the proposed loan agreement and how the interest rate is calculated. It also requires lenders to draw attention to the risks when taking a loan in a foreign currency.
Member states are required to transpose the provisions of Directive 2014/17/EU into their national law by March 2016 and it is likely to result in substantial changes to mortgage lending procedures in Cyprus.