New EU regulations limit mortgage options for expatsMarie-Christine Veltkamp-van Paassen
On 14 July 2016, as a result of a new directive from Europe, the so-called Mortgage Credit Directive (MCD) under Dutch law has been amended. What does this amendment exactly entail?
Wage received in euros
The objective of the MCD is to protect expats who do not receive their wage in euros, but do have a mortgage in euros. Under the new directive, the bank has the obligation to warn the customer regularly when the exchange rate of the currency of his or her wages plunges. In that case, the customer is entitled to continue the mortgage in a different, more advantageous, currency.
No longer mortgage for all expats
The banks view this periodical monitoring duty as an unacceptable burden. They also bear the risk of the client converting the mortgage into a different currency. As a result, banks are no longer willing to grant mortgages to expats who are not getting their wages paid in euros.
Various groups of expats are now no longer able to buy a home. This includes expats working in the Netherlands for international organisations who are being paid their wages in dollars. It also includes Dutch people who have worked abroad and now wish to buy a home in the Netherlands.
Dutch expats wishing to let their home in the Netherlands can also become victim of the new regulations. At certain banks, after the end of their term working abroad, they must repay the loan and enter into a new loan. Problems may also occur during a divorce. If after the divorce the mortgage must be transferred into the name of one of the spouses, this is viewed as a new agreement. Thus it will fall under the new regulations. The bank may not want to cooperate in that case.
The effects of the MCD seems to contradict its intentions. The banks are currently diligently looking for solutions. One possible solution is a change in legislation (but in that case EU member states must receive more discretionary powers from the European Commission).
Another possible solution is the introduction of a national register listing all mortgages in foreign currency. A third party would take over the monitoring and warning duties from the banks.
Offering more attractive conditions is also being considered, for example by permitting higher repayments during times of substantial fluctuations. The extra repayments lower the mortgage payments. This will then cushion the negative effect of currency fluctuations.
We will have to wait and see what this search for a suitable solution is going to produce. This can take some time…
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This article was updated November 2017.