Despite the challenges presented by the pandemic, Luxembourg’s real estate sector is in good shape and still remains one of the most attractive sectors for investors. Hence the government, real estate professionals and consumers’ close interest in any European directive or amendment that could reshuffle the cards, like the Mortgage Credit Directive (MCD).
The MCD of the European Parliament and the Council on “credit agreements for consumers relating to residential immovable property” was first adopted in February 2014 – although implemented later on, in March 2016 – to facilitate the smooth functioning of the internal market for mortgages while ensuring a high level of consumer protection across EU Member States.
Following the European Commission’s request last December for technical advice on issues related to the MCD, the European Banking Authority (EBA) recently released its Opinion and Report. Although “consumer protection has become more effective throughout the EU single market and the practices related to the mortgages have been mostly harmonised across Member States” since the application the MCD, the EBA identified some specific issues to be addressed. It therefore suggested to:
– revise the requirements on pre-contractual and advertising information to provide consumers with the appropriate information to make an informed decision and to compare products;
– ensure that the requirements on information disclosure are fit for digital channels;
– introduce additional consumer protections measures when artificial intelligence systems are used for creditworthiness assessment;
– introduce borrowers-based measures in the information provided to consumers to promote responsible lending and borrowing while contributing to financial stability;
– establish an EU-wide definition of ‘green mortgages’ to encourage sustainable lending and borrowing.
Parliament and Council decision on a potential amendment remains to be seen.