The European Commission has drawn a mixed picture of the implementation of the 2014 Mortgage Credit Directive in a report published on Tuesday 11 May, which aims to feed into its thoughts on whether or not further legislative initiatives are needed in this area.
Firstly, the report highlights that the Directive has been effective in raising the level of consumer protection and has helped to harmonise mortgage lending practices in the Member States. However, it notes that the level of protection remains variable, as the Directive offers Member States a choice of options.
For the Commission, it will be important to ensure that consumer protection rules remain fit for purpose as the market evolves and new challenges arise, notably from digitalisation.
With the digitalisation of financial services, peer-to-peer mortgages could, for example, develop, it says.
The implementation of the Directive by the competent national authorities could also be further improved, in particular with regard to cross-border aspects, the Commission points out.
However, according to the report, the Directive has had only a limited impact on the creation of a single market for mortgage credit. Significant barriers to the cross-border provision of mortgage credit remain, mainly related to differences in national legislation in areas outside the scope of the Directive, the Commission explains.
But the over-transposition of the provisions of the Directive by the Member States has also created obstacles.
Although stakeholders do not consider financial stability to be one of the main objectives of the Directive, the Commission stresses that the Directive has made a real contribution to preventing consumers from taking out loans that they are unable to repay, has given them the opportunity to reduce their level of indebtedness and has limited the foreign exchange risk to which they are exposed in connection with foreign currency loans.
The crisis caused by the Covid-19 pandemic could further test the impact of the Directive on financial stability, the Commission points out.
See the report: https://bit.ly/2RJAQdy (Original version in French by Marion Fontana)