The Financial Supervisory Authority would make it easier to transfer a home loan to another bank, so that people can negotiate better loan terms and the Estonian loan market would have more competition than before.
Estonia, Latvia and Lithuania have the highest home loan interest rates in Europe.
In a letter to the Ministry of Justice, the Financial Supervisory Authority proposes that one way to increase competition in the lending market is to reduce the costs associated with transferring a home loan to another bank, i.e. the costs refinancing a home loan. Simply put, this means that in the future it would be easier and cheaper for customers to change the bank offering the mortgage and thus negotiate a better interest rate for the mortgage.
Siim Tammer, board member of the Financial Supervisory Authority, said that currently, in the case of a 150,000 euro transaction, a person pays a home loan to another bank by transferring a few hundred euros to the state as state taxes and other taxes.
“Well, in the big picture, it should become easier to be able to transfer the loan to another cheaper bank. When banks bid, they actually offer the customer better loan terms, and now if we start looking at what these collateral costs are are to transfer the loan, we can come to the conclusion that from a competitive point of view it is not reasonable to make these offers. This transaction simply does not pay off financially,” Tammer explained.
The law currently requires that bank transfers be made through a notary. The State has entrusted the notary with the task of verifying as an independent official that everything is correct and correct with the transaction. Tammer said this doesn’t necessarily have to be the case.
“In Finland, for example, there is no form of notarization of the operation of taking out and modifying a mortgage. It is not necessary to do this at a notary. In Sweden, however, the transfer of the home loan to another bank it is simplified to avoid these types of costs. For example, in Sweden there is no state fee for switching banks,” Tammer said.
One possibility would be, according to Tammer, if instead of the notary the bank was responsible for the correctness of the transactions in the event of transfer of the real estate loan to another bank.
«These are large credit institutions, if the role of the notary is removed or reduced, then the responsibility remains with the credit institution. Ultimately, if something happens to this loan, if this data is not, for example, accurately and correctly recorded in the register or in the contract, the victim is still the creditor. The question is whether this type of control is reasonable,” explains Tammer.
In a letter to the Ministry of Justice, Tammer underlines that in a market with few companies, i.e. an oligopolistic market, such as the Estonian banking market, it is important that the costs associated with switching banks do not hinder the efficient functioning of banks. the market.
Justice Ministry spokeswoman Elisabet Mast said that since the Finance Inspectorate’s proposal is still fresh, the Ministry has not yet taken a position on it.
Jaak Tõrs, head of the financial stability department at Eesti Pank, confirmed that the experience of other countries shows that the transfer of real estate loans to another bank can be organized much more efficiently than is currently the case in Estonia.
Tõrs said that since the home loan is long-term, it should be possible to change the reference interest rate used in the loan agreement more easily and more favorably during this period. So, for example, it should be easier to calculate the three-month Euribor instead of the six-month Euribor, or to fix the interest, for example, for three or five years.
The precise plan of Eesti Pank and the Finantsinspektsioon to improve competition in the credit market is expected to be completed between February and March.
2024-01-05 02:45:00
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