Good news for borrowers: the Luxembourg government is in the process of working on a bill that would limit the amount of penalties in cases of early repayment of your home loan!

A European directive on mortgage contracts

The 2014/17/UE directive of the European Parliament and of the Council, dated 4 February 2014, oversees credit agreements for consumers related to immovable properties for residential use.

Article 25, regarding early repayments, states that the consumer has the right to fully or partially discharge a refund of the credit before its expiration. It specifies that the EU member states may decide the conditions related to this prepayment. So far, with no surprises, every borrower in Luxembourg knows that these conditions exist, and each has been able to discuss and negotiate them with their credit agency.

This article also states that the member states have the option of deciding that compensation cannot exceed a certain level or can only be allowed for a certain period. This is where it gets interesting!

A payment penalty limited to six months of interest?

The government of Luxembourg is seeking to implement this directive into national law. The first discussions suggest that the legislation would include six months’ maximum penalty interest in case of early repayment of a home loan.

The project will be planned before the end of the year. If it comes to fruition, it will be very good news for all those who plan to take out a mortgage!

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