Banks will soon have to make it easier for customers to amend certain aspects of their loan agreements rather than requiring an entirely new agreement.
Thousands of homeowners in Belgium took advantage of historically low interest rates before 2022, when these sat below 2% on average for several years, to negotiate better rates for their mortgages. Though interest rates in Belgium have more than doubled since, Immoweb predicted last month that these could soon fall.
The real estate website argued that if customers act quickly when interest rates drop, they could save tens of thousands of euros overall by renegotiating the rates, though analysts stress that the cost of the reinvestment fee should be taken into account. This is a sum equivalent to up to three months' interest on the remaining amount of their loan, which is charged when customers change banks but also when simply adjusting the rates with the same bank.
In addition, the bank charges filing fees and in many cases, the intervention of a notary is required, which seriously adds to the cost. However, Federal Economy Minister Pierre-Yves Dermagne (PS) will soon table a proposal to cut costs, his cabinet confirmed to The Brussels Times following reports from De Tijd.
Savings through simplicity
The measure is the latest in a series that Dermagne has taken to change mortgage credit rules. He has previously ensured that mortgage loans would be separated from other financial products, such as debt balance insurance.
The latest change will mean that if customers want to change certain aspects of their loan agreement (such as renegotiating the interest rate or revising their repayment method or term of the contract) the bank will have to do so through a simple amendment, Dermagne's spokesperson Laurens Teerlinck explained. "The bank can no longer do this through a new credit agreement. This means that the borrower will have to pay fewer fees, as the cost of an amendment is half the cost of applying for a new contract."
The administration fee will be halved (€175 instead of €350) while the reinvestment fee (maximum of three months interest on the outstanding balance) will be removed. For a person taking out a home loan for €240,000 at 3.5% with an outstanding balance is €200,000, this amounts to €1,750 in savings, Teerlinck explained. Furthermore, amendments will not require a notary, which is often the case when taking out a new credit.
Spurring competition
Teerlinck explained that this measure, and the initiatives launched in the past months, all aim to ensure consumers can play a more competitive role in the banking sector. "This is necessary because there is a lack of competition, as the Belgian Competition Authority pointed out."
He added that this is also an important measure at a time when interest rates on loans are falling.
However, not all changes to mortgages are covered by this rule and the existing procedure remains for people who want to temporarily suspend interest repayments, change the amount of their loan or change banks.
Costs will likely be cut before the end of the legislature, as the measure is part of a variety of provisions that are being rushed through parliament in early May. This also includes a proposal to extend the right to a basic banking service for all consumers of Belgian nationality, including those living outside the European Union and the European Economic Area.
