Dáil Éireann Debate, Tuesday - 12 June 2018
226. Deputy Michael McGrath asked the Minister for Finance the maximum age that a borrower can be scheduled to have normal repayments for the duration of a mortgage; and if he will make a statement on the matter. [24986/18]
Amharc ar fhreagraThere are a number of measures in place in order to protect consumers who are taking out a mortgage. These measures seek to ensure that lenders act with due skill, care and diligence in the best interests of their customers and that borrowers are protected from the beginning to the end of the mortgage life cycle; for example, through protections at the initial marketing and advertising stage, in assessing the affordability and suitability of the mortgage and at a time when borrowers may find themselves in financial difficulties during the course of the credit agreement.
For example, the European Union (Consumer Mortgage Credit Agreements) Regulations 2016, which transposed the Mortgage Credit Directive into Irish law, provides that lenders must act honestly, fairly, transparently and professionally, taking account of the rights and interests of the consumer, in relation to the provision of mortgage credit. In particular, lenders must assess the creditworthiness of consumers (which must be carried out on the basis of information on the consumer’s income and expenses and other financial and economic circumstances which is necessary, sufficient and proportionate) and that assessment shall take account of factors relevant to verifying the prospect of the consumer being able to meet his or her obligations having regard to the terms of the proposed credit agreement. Furthermore, it provides that the lender shall only make mortgage credit available where the creditworthiness assessment indicates that the consumer's obligations resulting from the credit agreement are likely to be met in the manner required under the agreement. In addition, the European Banking Authority has published Guidelines on Creditworthiness Assessment which provides additional detail on the creditworthiness requirements of the Mortgage Credit Directive which indicates, in guideline 4.3, that if the mortgage loan term extends past the consumer's expected retirement age, the lender should take appropriate account of the adequacy of the consumer's likely income and ability to continue to meet obligations under the credit agreement in retirement. Furthermore, where advisory services are being provided in relation to mortgage credit, the Regulations provide that it will be necessary to obtain information regarding the consumer’s personal and financial situation, preferences and objectives and that any assessment shall take into account reasonable assumptions as to risks to the consumer's situation over the term of the proposed credit agreement.
Also, the Central Bank’s Consumer Protection Code 2012 imposes ‘Knowing the Consumer and Suitability’ requirements on lenders. Lenders are required to assess affordability of credit and the suitability of a product or service based on the individual circumstances of each borrower, including the age of the borrower. In particular, a regulated entity must gather and record sufficient information from the consumer prior to offering, recommending, arranging or providing a product or service appropriate to that consumer. The level of information gathered should be appropriate to the nature and complexity of the product or service being sought by the consumer, but must be to a level that allows the regulated entity to provide a professional service and must include details of the consumer’s needs and objectives, personal circumstances (including age where relevant) and their financial situation. Also, prior to offering, recommending, arranging or providing a credit product to a personal consumer, a lender must carry out an assessment of affordability to ascertain the consumer’s likely ability to repay the debt, over the duration of the agreement. A regulated entity must take account of the result of the affordability assessment when deciding whether a personal consumer is likely to be able to repay the debt for that amount and duration in the manner required under the credit agreement.
Under the provisions of the Code, when assessing the suitability of a product or service for a consumer, the regulated entity must, at a minimum, consider and document whether, on the basis of the information gathered:
- the product or service meets that consumer’s needs and objectives;
- the consumer is likely to be able to meet the financial commitment associated with the product on an ongoing basis and is financially able to bear any risks attaching to the product or service;
- the consumer has the ability to repay the debt in the manner required under the credit agreement, on the basis of the outcome of the assessment of affordability; and
- the product or service is consistent with the consumer’s attitude to risk.
However, subject to complying with relevant consumer protection and other regulatory/macro prudential requirements, it is then a matter for individual lenders to set their own lending policies and to make their own commercial decisions on individual mortgage or other credit applications.
