The state could provide support to mortgage loan takers whose payments exceed 20% of their income. However, this support would not apply to families with children, who may be provided with support regardless of the size of the payment in relation to their income.
This is provided by the amendments to the Consumer Rights Protection Law submitted to the Saeima’s Budget and Finance Committee for a second reading on Wednesday, the 1st of November. Once this is done, the Saeima and the committee will have to view it in the third and final reading.
The credit institution will have to pay a fee to the mortgage borrower in the amount of 30% of the interest payments calculated for the relevant quarter, but not more than two percentage points of the interest rate fixed for the period, taking into account that the reduced interest rate may not be lower than the initial rate.
An accurate redaction of the legislative draft will be available for the second reading in the Saeima.
The current version of the legislative draft provides for support for consumers whose last calendar month’s calculated mortgage loan payment exceeds 20% of the consumer’s average monthly net income for the past six months.
To receive support, consumers will have to meet multiple other criteria. Support will be provided for either the sole mortgage loan contract or apply to the housing where the consumer or his family member officially lives.
The mortgage loan needs to have been signed prior to the 31st of October 2023 and the mortgage balance must not exceed EUR 250 000. Consumers will have to submit an application to the credit institution to receive specific support.
The amendments provide for the introduction of a protection fee for mortgage borrowers to support credit institutions. The protection fee of the mortgage borrower would not apply to those mortgage loans issued at a fixed interest rate throughout the loan repayment period. It is possible this will be further clarified for the Saeima meeting.
Also read: Budget Committee’s decision on mortgage loans is risky, Bank of Latvia expert warns
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