Do other EU countries cap mortgage rates?

[Black_Adder]

"..The interest margins of new housing loans shrank slightly and reached 1.4% in December 2014. The margins have more or less doubled since 2011.6 Despite this, Finns pay extremely low interest rates for housing loans compared to the euro area average. The average interest rate was 1.6% in Finland and 2.8% in the euro area..

Proportion of long-term funding grew


Approximately 61% of Finnish banks’ funding comes from non-MFI deposits, but there is much variation between credit institutions: some fund their operations entirely with deposits, while others do not take any deposits. In 2014, non-MFI deposits grew by about 3.7% compared to the previous year and totalled €151bn in December. More than half of these were households’ deposits, which totalled about €81bn. Proportionally the amount of deposits shrank slightly as a source of funding while long-term bonds grew compared to 2013.

The portfolio of bonds issued by credit institutions grew by 8% during 2014, reaching €97bn. Covered bonds comprised €29bn of the portfolio.

Bonds with a maturity period longer than one year were the fastest growing source of funding. Short-term bonds (maturity less than one year) only made up less than 10%. Their proportion has been decreasing for several years now. By favouring longer average maturities in funding, banks prepare for upcoming regulation that requires more long-term funding in proportion to granted loans. Basel III net stable funding ratio (NSFR) requirements potentially enter into force in Europe in 2018..."

http://www.finanssiala.fi/en/material/Finnish_Banking_2014.pdf#search=mortgage

Also: they have a 'usury' law and there are lots of EU countries with caps on mortgage interest rates ...except Ireland [ 3rd world country] is NOT one of them

 

[Brendan Burgess]

there are lots of EU countries with caps on mortgage interest rates

Hi Adder

This is very interesting. I have not been able to identify any.

Can you link me to them?

Brendan

 

[Black_Adder]

I had the source in front of me - but I didn't save it - I will see if I can locate it. I think it was an ECB document (!!)

 

[Black_Adder]

This isn't quite what I originally had - but it looks even better
[broken link removed]

"Study on interest rate restrictions in the EU
Final Report" 2009

 

[Sarenco]

This isn't quite what I originally had - but it looks even better
[broken link removed]

"Study on interest rate restrictions in the EU
Final Report" 2009

I'm not sure about the provenance of that document but, assuming it's accurate, it would appear to indicate that no EU Member State applies an absolute cap on mortgage rates.

It does, however, appear to show that a minority of EU member states apply a relative cap on mortgage rates that is calculated by reference to the average rate on all outstanding loans of a particular type.

I am personally an advocate of the French approach that caps rates at 133% of the average rate on all outstanding floating rate mortgages in the previous quarter (or some variation of that formula, perhaps referencing the new business floating rate as returned to the ECB).

 

[Black_Adder]

Remarkable if you read all 200+ pages in 15 minutes.
Try France.
EC.Europa.eu kinda means it an EU document unless you think I wrote it.
In fact the Banks should have been challenged long ago on 'previous dealings' where the non-tracker variable rate remarkably and faithfully followed ECB changes unless a certain Bank decided that it would demonstrate just how weak the consumers hand is in this country - dead as a dodo.

 

[Sarenco]

Remarkable if you read all 200+ pages in 15 minutes.
Try France.
EC.Europa.eu kinda means it an EU document unless you think I wrote it.

France doesn't have an absolute cap on mortgage rates.

Most of that paper is irrelevant to this topic so I didn't have to read the whole thing.

 

[Sarenco]

In fact the Banks should have been challenged long ago on 'previous dealings' where the non-tracker variable rate remarkably and faithfully followed ECB changes unless a certain Bank decided that it would demonstrate just how weak the consumers hand is in this country - dead as a dodo.

I'm sorry but I can't make any sense of that sentence - could you rephrase it please?

I wasn't suggesting that you wrote the linked paper but it doesn't appear to have been prepared by any EU institution and I don't recognise the authors' names (hence my caution about relying on its contents).

 

[Black_Adder]

Caution?

In law there is an equitable principle of previous dealings. This is where something is being done with the agreement of both sides that is not exactly what the written contract says.

So if for 7 years the SVR followed faithfully the changes in ECB - would there be a case that the Bank was now bound to continue that?

This has never been argued nor for that matter have any guardians of the consumer set up by the State even intervened on any conduct issue of any Bank ever.

 

[Sarenco]

Caution?

Yes, I am cautious about relying on texts where I don't recognise the authors.

So if for 7 years the SVR followed faithfully the changes in ECB - would there be a case that the Bank was now bound to continue that?

No, where there is an express contractual term that deals with an issue, the previous dealings of the parties in relation to that issue are irrelevant.