Individual insolvency levels across the EU could drop in the years to come as new proposals are adopted to determine the basic terms on which a mortgage should be offered.
A mortgage is the single largest debt most people will ever take on board, and defaulting on repayments – or, worse, entering negative equity – can leave would-be homeowners facing individual insolvency instead.
However, new proposed rules approved last week by the European Economic and Monetary Affairs Committee should help to reduce some of the more extreme risks associated with taking out a mortgage.
For instance, if agreed upfront, the proposals suggest that simply handing back the property should clear the debt – regardless of the asset’s value, or the outstanding size of the loan.
This could be excellent news in future recessions or housing market crashes, where falling valuations can leave homeowners owing more to their lender than their home is worth.
Meanwhile, those who default on their repayments should be treated fairly, according to their specific circumstances – meaning families should be left with enough to live on, after any seizures are made of their pension policies or monthly salary.