On 31 March 2011 the European Commission published a draft directive on mortgage loans. The directive will, in brief, apply to:

  • credit agreements secured by a mortgage or other security interest in residential property;
  • credit agreements for the purchase of land or residential property;
  • certain types of credit agreements for the renovation of residential property.

The draft directive in principle does not apply to commercial property.

Under the draft directive, many of the requirements imposed on "ordinary" credit agreements in the Consumer Credit Directive (see above) are also imposed on mortgage loans.

The subjects covered by the draft directive include:

  • the advertising and marketing of mortgage credit;
  • the pre-contractual information that must be provided to clients in a standardised format; 
  • the calculation of the annual percentage rate of charge;
  • the standards for advising clients on mortgage credit;
  • the right to early repayment.

The draft directive has been submitted to the European Parliament and the European Council. The relevant committee of the European Parliament is scheduled to accept the draft report for first (or sole) reading on 24 October 2011.