Saeima takes first step on mortgage relief law

The Latvian Saeima on October 12 took a first step towards legislating on compulsory reductions in mortgage payments that banks can charge their existing customers.

ln a first reading of proposals prepared by the Budget and Finance (Tax) Commission, it is planned to reduce the borrowing rate for mortgage loan contracts for one year by 50 percent, the amendments being part of the Consumer Rights Protection Law.

The reduced rate is planned to be set for one year from November 1, which would be a solution to the current crisis which has seen mortgage payments rocket for many homeowners, said Jānis Reirs, the chairman of the Budget and Finance (Tax) Commission. The support will apply to standard loans that are not in arrears, and should not affect the credit rating of borrowers in the future.

The rate reduction is planned to be applied to loans issued until September 30 of this year and whose balance does not exceed 250,000 euros. 

In order to be able to apply the reduced rate to the loan, the amendments stipulate that the borrower must submit an application to the lender, giving consent to verify information about his or her income and credit obligations, the proposal provides – though such checks are usually part of the mortgage application process in the first place. 

Amendments in the Budget Commission and the Saeima session must be considered in second and third readings before they become law.

The debate on the proposals saw banks – and particularly Scandinavian-owned banks – coming under heavy criticism from many lawmakers for racking up large profits and allegedly dominating the market and squeezing out competition. An appearance by banking sector representatives on LTV show 'What's Happening In Latvia?' has clearly rankled with many deputies who said they found the bankers to be arrogant.

Some opposition deputies called for the establishment of a new development bank, though without specifying where the revenue would come from to fund it. There were also regrets expressed that some locally-owned banks had disappeared from the scene in recent years, notwithstanding their reputations for running massive money-laundering operations that almost destroyed the sector's international credibility.

The Latvian central bank and European Central Bank were also targets for opprobrium.


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