Latvian Saeima has passed in the final reading amendments to the Consumer Rights Protection Law proposed by the Budget and Finance Committee that support for mortgage loan takers in 2024 will be equal to 30% of their respective interest payments. This support will not go higher then two percentage points of the fixed interest rate for the period.
To provide this support, credit institutions will be obligated to pay a fee “in order to protect public welfare, considering households’ burden of payments”.
Banks, as payers of the fee, will have to calculate loan interest compensation for each eligible mortgage loan takers at 30% of interest payments made in a quarter and calculated in accordance with the relevant mortgage loan agreement, but not more than two percentage points of the interest rate (total rate) determined for the period.
However, interest compensation for mortgage loans will not be paid for fixed-rate mortgage loans for the entire loan repayment period.
The compensation will be provided to mortgage loan takers whose contract was signed before the 31st of October 2023 and whose remaining amount does not exceed EUR 250 000.
Credit institutions obligated to pay the fee will pay it for consumers’ (private persons) loans, the repayment of which is secured by a mortgage on real estate located in Latvia.
The fee will be administrated by the State Revenue Service (VID). This institution will provide credit institutions with necessary information. VID will also have to provide credit institutions with the mortgage loan taker’s payment account number that will be used to receive the compensation.
Credit institutions will have to pay the fee for each calendar quarter in the amount of 0.5% of the total amount of mortgage loan balances issued by the payer of the fee as of the 31st of October, 2023. Protection fee for mortgage loan takers will not be calculated and paid to mortgage loan takers issued at a fixed interest rate for the entire mortgage loan repayment period.
VID will pay the interest compensation for loans calculated by the payer of the fee from the proceeds of the mortgage protection fee to the bank account of the particular mortgage borrower indicated by the payer of the fee.
VID will need to pay the compensation once a quarter
and no later than the 30th of the next month after a quarter. This could mean that the first payment of the compensation could be transferred to loan takers’ account by the 30th of April 2024.
The law stipulates that disputes between a consumer and a payer of the fee in relation to the calculation of the compensation of interest on loans will be resolved in accordance with the procedures of the Civil Procedure Law.
Interest compensation on loans will not be subject to deductions, other payments and debt collection.
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