By means of contrast, the Mortgage Credit Directive as elaborated by EBA implies a borrower-focused test.

In specific, the directive clearly states that the creditworthiness test cannot depend predominantly regarding the known proven fact that the worth of the property surpasses the total amount of the credit or the presumption that the home will rise in value, unless the goal of the credit contract is always to construct or renovate the home. Footnote 44 In addition, when creating the judgement concerning the creditworthiness, the creditor “should make reasonable allowances for committed as well as other non-discretionary expenses for instance the consumers’ actual obligations, including appropriate substantiation and consideration regarding the cost of living of this customer” (European Banking Authority 2015b, guideline 5.1). What’s much more, the creditor should also “make wise allowances for prospective negative situations as time goes on, including as an example, a decreased earnings in your your your retirement; a rise in benchmark rates of interest in the scenario of adjustable price mortgages; negative amortisation; balloon re payments, or deferred re payments of principal or interest” (European Banking Authority 2015b, guideline 6.1). Read more