Banking umbrella organization Febelfin sounded the alarm on Tuesday now that the House is about to abolish the reinvestment fee for those who refinance the loan with their own bank. According to the sector, the measure could jeopardize the refinancing of home loans with fixed interest rates, because the question arises whether lenders will still be inclined to review a loan without compensation.
Anyone who borrows at a fixed interest rate and, for example, wants to benefit from a low interest rate – when the interest rate was very low for years, many Belgians refinanced their home loan – now has to pay the bank file costs and a reinvestment fee. This corresponds to three months’ interest on the outstanding credit amount. Anyone who refinances with another bank must also pay notary costs and registration fees.
At the end of March it was announced that Minister of Economy Pierre-Yves Dermagne (PS) wants to scrap these additional costs. In a broad bill with various provisions that will be voted on in the plenary Chamber on Thursday, an internal refinancing is labeled as an amendment to the credit contract instead of a new credit agreement. As a result, the bank can no longer charge a reinvestment fee, but only the file costs (maximum 175 euros). Nothing changes for refinancing with another bank.
Arguments
Febelfin puts forward a series of arguments against the change. Belgium is unique in Europe because the vast majority of consumers opt for a fixed interest rate, which offers protection in times of rising interest rates. An “important form of financial security and unprecedented protection of purchasing power,” according to the banks. And with a three-month reinvestment fee, the Belgian market is, according to the sector, the most affordable in Europe for consumers. With falling interest rates, a fixed loan is de facto “variable” in this perspective, due to a limited cost of refinancing.
The banks are now warning that the refinancing of a home loan with a fixed interest rate may be at risk. “This proposal is absolutely unreasonable and does not take into account the reality of the credit market, where lenders effectively suffer damage when an interest rate is revised. Moreover, this legislative initiative could challenge the refinancing of fixed-rate home loans. The question arises to what extent lenders will still be inclined to revise fixed interest rates in the interim without limited compensation being possible,” said a press release. The sector also warns of a “major negative impact on the stable housing market”.
Finally, the banks are advocating not to vote on the proposal, but to enter into dialogue with the sector, better map out any consequences and develop a “more balanced” proposal.
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Tags: Banks warn abolition reinvestment fees refinancing Economy
