Mortgage credit and insurance: the law that will create more competition? To have…

Mortgage credit and insurance: the law that will create more competition? To have…
Mortgage credit and insurance: the law that will create more competition? To have…

This is a law that will interest everyone who is about to take out a mortgage loan. Supported by the Minister of the Economy, the socialist Pierre-Yves Dermagne, it comes into force on June 1 and aims, in particular, to bring more competition to certain insurance products. However, some voices are raised to believe that the objective pursued will not be achieved. Let’s see why.

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1. What does the law say?

The law aims to regulate the group sale of a mortgage loan with other products in particular. You should know that, since 2016, combined sales have been prohibited. Clearly, a bank can no longer force its client to whom it grants a housing loan to subscribe to “its” insurance product. On the other hand, the bank can always link an interest rate reduction to the subscription of a insurance Until now, this price reduction could be lost if the customer canceled their insurance contract to benefit from a competing offer.

With the new law, those who take out a new loan will no longer lose the price reduction if they change insurance but only after a third of the loan period. Note also that the new law only authorizes discounts with the subscription of “outstanding balance” and “fire” insurance. And it allows you not to link a loan to a current account, and there without requesting the delay of a third of the loan period.

2. Why this law?

“The Price Observatory had highlighted a competition problem in fire insurance. Its study was able to objectify things. One of the causes of market dysfunctions came from the link of the insurance product with the conditions of mortgage credit. The reform aims to facilitate mobility on products that were of little benefit to the consumer.We hope it will be beneficial to all consumers,” we explain to the Dermagne office.

3. Why a delay of one third of the duration of the loan?

The initial project provided for a period of only 2 years so as not to lose the price reduction in the event of a change of insurance. But the banks opposed it and their lobbying worked. Another important point: the law only concerns new credits. The National Bank, which is the regulator of the banking sector, believed that by also including old loans, we would have changed the rules of the game.She was quite clear on this point”we specify at the Dermagne firm.

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It is a law which seeks to provide more transparency and to avoid unpleasant surprises. It is not, however, magical.”

4. Will this law achieve its objective?

At the Dermagne firm, we are convinced that this should bring “more competition, especially on fire insurance”.

But doesn’t the new law risk making banks less inclined to grant discounts? “It costs a lot more to acquire a customer than to keep them,” we respond to the office. An argument which suggests that banks will have an interest in continuing to offer discounts.

The experts from the hypotheek.winkel comparator are dubious and even critical. “This law is not a revolution”, explains Renaat Acke. Even if, he concedes, she will “solve some small problems”. Example: if the insurer terminates the fire insurance due to excess claims, the bank cannot call into question the price reduction on the mortgage loan.

On the other hand, the expert doubts the argument of greater competition for a product like outstanding balance insurance. And take the example of a 25-year mortgage. If the borrower wants to change insurance, he will only be able to do so after seven and a half years. “The borrower will be older and closer to the end of their life. Which limits the possibilities of more interesting conditions”continues Renaat Acke.

For fire insurance, he believes that the law brings more competition “in theory”. Given the habits adopted by an insured, what are the chances that he will change companies? “I don’t think this law will change things”he believes.

Just as he is skeptical about the new law on mortgage loans, which aims to eliminate the re-employment compensation for borrowers wishing to benefit from a reduction in rates. In the new text, which should come into force in mid-June, the bank will no longer be able to request compensation (of a maximum of 3 months) if its customer keeps their loan with it. “But the bank is not obliged to match the best rates offered by outsiders. The consumer will not be a winner,” asserts Renaat Acke. “It is a law which seeks to provide more transparency and to avoid unpleasant surprises. It is not, however, magical”we respond to the Dermagne cabinet.

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