Loans: ÖVP for help for borrowers, green proposal but not an issue

“What unites us is the goal that we want to help those people, and especially the families here,” said Wöginger on Wednesday after the Council of Ministers meeting. “We have to discuss the measures as to how we get there.” With that I have Wöginger But it didn’t mean that they were open to the green proposal – on the contrary, the draft for an initiative proposal was “not an issue,” it was said from the APA club.

The Greens’ proposal, according to which private borrowers should be able to retroactively convert a variable-interest real estate loan, is – contrary to what was originally reported in the media – not a proposal from the (Green-led) Ministry of Justice, but one from the Green parliamentary club, “the “We have submitted and we want to discuss it,” said Green Club leader Sigrid Maurer in the press foyer. According to the draft initiative proposal, the retroactive conversion should apply to all variable mortgage or real estate loans taken out from March 21, 2016. The banks would therefore be obliged to offer conversion to all those affected. The conversion option should be available once – until the end of 2024.

Retroactively to the conditions at the time

According to the proposal, the conversion claim should enable a change as if the borrowers and the bank had already originally agreed (“before the unforeseen increase in interest rates”) on a fixed rather than a variable loan rate. It would therefore be concluded retroactively under the conditions at that time – only with a fixed interest rate. The banks should present loan customers with a switching offer within two months, which states the fixed interest rate.

In addition, the fixed and variable interest loans would have to be compared so that consumers can compare the contract terms at a glance. In case of non-compliance, the proposal envisages administrative penalties for banks. The fixed interest rate to be applied should be determined by the Financial Market Authority (FMA) so that banks do not make offers with arbitrarily high interest rates.

Maurer: Around 500,000 households affected

Maurer said there are “many examples of families” who now have to pay much more per month than before, with around 500,000 households affected. It was not foreseeable to the people who took out these variable loans that Russia would invade Ukraine, she said, one of the reasons for the interest rate increases. The background to the problem is the interest rate turnaround initiated by the European Central Bank (ECB) last year. Due to the increase in the key interest rate, the interest rates on variable loans and thus also the repayment rates have increased, which has caused many borrowers to get into financial difficulties. “We believe that we need to provide support here because people are collapsing under this interest burden,” said Maurer.

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“Dramatic change” in interest rates

Wöginger spoke of a “dramatic change” in interest rates over the past two years. “Variable interest rates have risen sharply and rapidly, and of course that is effectively unaffordable for these families in times like these.”

The “Kurier” had previously reported reservations on the part of the ÖVP-led finance ministry. “The proposal was submitted at short notice and at first glance raises, among other things, constitutional questions,” the newspaper quoted from a statement from the ministry. According to “Standard”, the Ministry of Finance wants to examine the idea. However, the proposal is “half-baked”. The effects on financial market stability and banks have not been examined. In addition, subsequent intervention in contracts is tricky. A statement from the ministry, also available to the APA, also states: “In the current interest rate situation, this proposal would not bring any relief for people. This will not create a single apartment or property. The aim must be to create living space and property – but not with this approach. This proposal would be an intervention in the free market.”

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