Extortionate rate rise on mortgage in Latvia

Discussion in 'Overseas property investment' started by Col2012, Feb 23, 2012.

  1. Col2012

    Col2012 Guest

    Hi, here is a pretty awful experience I went through with UniCredit bank Latvia that I wouldn't want anybody to have to go through. Do take care if you are in this situation. It could cost you dearly.

    I have a mortgage with UniCredit for a property in Latvia. Recently I faced payment difficulties due to losing my job and falling rents. I asked the bank to see if they could suggest a way out otherwise I face default. They said they can help by offering me a temporary interest only period. On condition that interest rates are increased to be able to benefit from this concession. I was reluctant about the rate rise but figured interest only with the rate rise is still lower monthly than full repayment until I get my feet on the ground. So accepted the proposal.

    All went well until the interest only grace period was up. To my horror I realised they had permanently increased interest rates. Not just for the interest only period. So it wasn't for the duration of the grace period but to the entire loan until maturity in 20 years.

    I calculate this will cost me about €300 extra each month from now.

    I tried to argue that since there was no additional borrowing, no extension of the morgage term it is quite unfair to do this to someone in a difficult position. There is no justification to permanently increase rates. I didn't read the small print and was in a rush to sign. They just throw it back in my face and seem to say too late, you've signed.

    Has anybody been here before? What did you do?

    If you are considering "assistance" from your bank watch out of onerous terms.
  2. RPC757

    RPC757 Frequent Poster

    Have you investigated the possibility of moving to another lender? What is the amount owing on the mortgage V the value of the property. I understand Latvia has experienced a property of similar order to ourselves?
  3. DrMoriarty

    DrMoriarty Moderator

    Not to be unsympathetic, but right here is your problem. You may be pretty sure that the bank's position is watertight; unless, as suggested, you can move to a new lender, I don't see how you can expect to get out of an agreement you signed up to. It's hardly "extortion", is it?
  4. Col2012

    Col2012 Guest

    On the one hand I was stupid enough to sign something I did not thoroughly read. However there are guidelines from banking authorities that a lender may not offer a solution that ends up costing the borrower more. It's seen as exploitation. That a lender should provide sufficient information such as new payment schedules before asking a borrower to sign on the dotted line. They didn't in my case. But it is a grey area for btl.

    I say extortion because it did not cost UniCredit bank anything to offer me a temporary interest only period. However they insisted that without agreeing to a rate rise I could not go on interest only.

    My point is beware of such underhanded tactics from banks.
  5. 44brendan

    44brendan Frequent Poster

    Loan is located in Latvia & would be subject to Latvian legislation. However, laws of contract should apply also and I assume that (as required in Ireland) the Bank should have formally advised you in writing of the price increase applied for the requested change in payment structure. You state that you signed a document without reading it. Why would you now blame the Bank for being extortinate if they advised you in the agreement that a price increase was being applied in return for the change in repayment terms and you failed to read the agreement before signing it?
  6. Col2012

    Col2012 Guest

    Legislation says banks should discuss with borrower in advance of putting proposal in a legal document to sign. Reason for this is to stop banks exploiting a layperson. If they did this of course I would spot the sheer unfairness. In my case I had a rep out there who saw the paperwork for the first time at the point of signing on my behalf.

    There was hardly any change in repayment terms even. Just 6 months interest only proposed during which they would get higher interest.

    Now to argue this in court is lengthy and costly. The reaction of banks and even courts in CEE against Western European borrowers is very negative these days. They blame us for their screwed up property markets.
  7. Gunn

    Gunn Registered User

    This is true in Latvia, also they cannot offer you a solution which ultimately costs you more. but banks do try and get away with it especially when it comes to foreigners.

    UniCredit in Riga did this to me, on the phone they were the friendly bank offering interest only with a rate rise just to compensate for the period in which they won't receive capital. But like you they sneaked in the rate increase until the whole bloody mortgage is paid off. Am in a worse position than before. I was livid. UniCredit are an outrage. If the legal route isnt viable you can complain to their banking authority FKTK and possibly PTAC the consumer organisation if you live there.