Commission guidelines for lenders aim to help borrowers

The European Commission has issued a set of guidelines aimed at making it easier for consumers to compare mortgages - including those from lenders in other EU member-states.

The voluntary code, agreed after three years of negotiations with lenders and consumer groups, lays down what information lenders must provide to consumers seeking a mortgage.

Prospective borrowers must be told how much they will pay over the lifetime of the mortgage and of any extra costs involved in taking out the loan. Borrowers will also receive personalised information, including terms for early repayment.

Many of these measures have already been adopted in the Republic and were incorporated in the Consumer Credit Act.

The EU Internal Market Commissioner, Mr Frits Bolke stein, said the code would be of great practical help to borrowers throughout the EU and would help them to make an informed choice from a broader range of mortgages.

"Buying a flat or a house is often the most expensive financial commitment people ever make and it is important to help them to choose the best deal. The better the information provided, the more confident the consumer can be of his choice of home loan. At the same time, this code will help lenders seeking to sell their loan products in other member-states by boosting consumer confidence," he said.

Consumer groups welcomed the guidelines but said the system would have to be monitored closely to ensure that it was effective. And the EU Consumer Protection Commissioner, Mr David Byrne, warned that, if the voluntary guidelines were not effective, they could be replaced by legally binding ones.

"I am now very keen to see this agreement work on the ground, where it really matters to consumers. That will be the real test of the efficiency of self-regulatory instruments like this voluntary agreement. Businesses must realise they have an obvious interest in boosting consumer confidence in their integrity by respecting high standards of good practice, like those presented today.

"Self-regulation is an issue in the ongoing debate on governance. The main criterion for deciding whether it is appropriate in this area must be how it actually works - otherwise public authorities will have to consider more binding instruments," he said.