The new summaries which lenders will be required to provide will include five key metrics which customers will be able to use as a basis for comparison, broadcaster DR reports.
Summaries will include the following five key details of mortgages:
- The monthly repayment (before tax) for the first 12 months of the loan
- The fee taken by the bank or financial institution for initialising the mortgage
- How much customers will be paying in interest and fees to the lender during the first 12 months
- The overall repayment for the entire mortgage
- The interest and annual costs as a percentage
The Danish Competition and Consumer Authority (Konkurrence- og Forbrugerstyrelsen), a government agency, said that the purpose of the new requirement is to make it easier for consumers to compare offers and thereby increase competition on the housing market.
“This is a market where customers often find it difficult to understand their loans and therefore take banks at their word,” the agency’s office manage Flemming Steen Nielsen told DR.
“Many customers do not thoroughly research the market and competition has therefore not been quite as well-functioning as one might like,” he added.
More understandable information would increase buyers’ interest in the market, encouraging them to look for more offers before making a decision, meaning lenders have to compete more for their custom.
“Prices and services for the consumer are thereby improved,” Nielsen said.
A number of schemes have previously been introduced to simplify the mortgage market for customers, but the new summary, which is introduced on October 1st, is the first to ensure all offers include a standardised summary with the same key figures.