Consumer research that featured in the Commission’s report that helped inform its own impact assessment of mortgage credit markets and its proposal for a Mortgage credit Directive, is available on DG Internal Market’s website: http://ec.europa.eu/internal_market/finservices-retail/credit/mortgage_en.htm

The Study on the costs and benefits of the different policy options for mortgage credit, analyses policy options in four areas: Precontractual information, APRC, responsible lending and early repayment. Consumer views on these four areas were collected and studied in order to inform the Commission and the lead researchers of the study on the relative merits and disadvantages of the alternative policy options that were open for consideration by the Commission.

The iff together with 10 fellow EU consumer associations carried out research of consumer views and preferences which fed into the Commission’s analysis behind its proposal. The report entitled “Annex A: Household Surveys and Consumer Focus Groups” shows the results of the consumer research in 10 Member States.

Certain provisions in the Directive proposal will go some way to improving identified consumer detriment, and will address some of the problems identified in the findings found in the Annex report. Examples include:

• The decision-making process for consumers generally takes place over a relatively long period. About half of the consumers surveyed have searched or would search for over a month to gather information on home loans before signing a contract. Internet is the most important source of information about mortgages, closely followed by information provided by the consumer’s own bank.
• The majority of consumers said that they found the information provided generally clear, useful and helpful in comparing different products. Nevertheless, a significant group of consumers had problems with the information provided or were dissatisfied (23%) with the information they were using. This is in contrast to the overwhelming majority of consumers surveyed who were unaware of standardised pre-contractual information (only 6% had heard of the ESIS)
• While consumers held price comparison to be the most important factor for selecting a mortgage, knowledge of the APRC was in general very low (59% of respondents did not identify the APRC as the best way to compare prices).
• Early repayment opportunities and fees were not seen as one of the most important factors by consumers, especially when compared with the importance consumers appear to place on the price and the amount of monthly instalments. When asked under what conditions early repayment could be more important, consumers thought of events like extra income, whereas problems with repayment and financial difficulties were mentioned far less often.
• When prompted to think about the subject, consumers are generally in favour of a universal right to early repayment and tend to prefer that fees be capped by law.
• Only half of the consumers surveyed said that they were aware that the lender uses a credit database to assess their creditworthiness, but consumers generally accept that such inquiries should be made.
• With regards to responsible lending, in addition to adequate explanation of the product, consumers said that they needed additional explanation and advice when taking out a mortgage, with about one-third of participants in the Consumer Focus Groups wanting an explanation of the suitability of the mortgage loan in relation to their needs and their personal circumstances. A majority of consumers in the Focus Groups also wanted advice to help them make the decision and provide reassurance.
• Vulnerable households are difficult to identify or define. In contrast to the informational approach to consumer theory, a substantive approach in consumer protection argues that consumer behaviour in relation to mortgage loans is less defined by personal abilities and more by objective factors which limit their freedom of choice.
• Etc...

The iff coordinated research is available here : http://ec.europa.eu/internal_market/finservices-retail/docs/credit/mortgage/study_cost_benefit-annex-a_en.pdf.