Mortgage borrowers will be compensated 30% of the total interest payments

Mortgage borrowers will be compensated for 30% of the total interest payments on loans, as stipulated by amendments adopted in the final reading in the Saeima on Wednesday, December 6th, in the Consumer Rights Protection Law.

With the amendments, mortgage lenders will calculate the total interest payment compensation amount for each contract – 30% of the total interest payments. This information must be submitted to the State Revenue Service (SRS). Compensation must not exceed two percentage points of the specified total loan interest rate for the period.

According to the amendments, mortgage lenders will also provide information to the State Revenue Service about the borrower's bank account to which the compensation amount will be transferred. The calculation and payment will be made once a quarter.

The compensation amount for interest payments will be transferred to each borrower's account by the SRS, and credit institutions will inform their clients about it through their internet banking.

It is specified that income tax will not be applicable to the paid amounts, and debt collection cannot be pursued against them.

The compensation for interest payments applies to mortgage loans for which the contract is concluded by October 31st of this year, and the remaining balance does not exceed 250 thousand euros. Compensation will not be calculated for contracts issued with a fixed interest rate throughout the loan repayment period.

To ensure the payment of compensation for interest payments, a mortgage borrower protection fee is imposed on credit institutions. It is set at 0.5% of the total outstanding balance of mortgage loans issued by the lender.

The application of interest payment compensation and the mortgage borrower protection fee is scheduled to begin in 2024.

Most mortgage loans are issued with a variable interest rate tied to the EURIBOR benchmark interest rate, and the amendments to the law are proposed to provide support to residents when household payments for mortgage loans have increased due to this rate hike, as indicated in the project's annotation by the authors of the law.

Amendments to the Consumer Rights Protection Law will come into effect on January 1, 2024.

Saeima Press Service

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