On 3 February 2016, a new bill on consumer lending related to residential real estate properties, which transposes Directive 2014/17/EU (the “Mortgage Credit Directive”), was uploaded on the Bulgarian Parliament’s website. 

Mortgage loans are currently governed by specific provisions of the Consumer Lending Act.  The anticipated adoption of a new, separate mortgage credit act is intended to build on the existing legislative framework in Bulgaria and enhance protection of consumers who borrow money secured by, or for the purpose of acquiring, residential real estate.   

Some of the key changes introduced by the new bill include the following:

  • Additional requirements for providing information, both before the contract and throughout the life of the mortgage loan agreement (such as: general and personalised information through the European Standartised Information Sheet, information to be provided by credit intermediaries,  advertising requirements, etc.);  
  • A mandatory reflection period of 14 days from when the consumer received the draft loan agreement, during which the creditor’s offer will remain binding;  
  • Regulation of the advisory services as a separate activity relating to mortgage credit and intermediary services;
  • Additional requirements on the valuation of real estate property, intended to ensure reliable standards of valuation;
  • Certain mechanisms to limit the exchange rate risks for consumers in the case of foreign currency loans; 
  • Detailed rules for calculating the APRC (Annual Percentage Rate of Charge), aimed at ensuring a consistent approach across the EU;
  • A registration regime for credit intermediaries, who are required to register with the Bulgarian National Bank, and method for passporting rights of credit intermediaries from other Member States. 

The new bill is expected to move swiftly through the parliamentary approval procedure and to enter into force by 21 March 2016 (which is the deadline for transposition in the Member States set out in the Mortgage Credit Directive). Once adopted and in force, it is expected to have an impact  on the availability of mortgage loans and thus on the residential property market.