On 23 June 2022, the European Banking Authority (EBA) published an Opinion and Report in response to the European Commission’s call for advice (CFA) on the review of the Mortgage Credit Directive (MCD).

The CFA covered 17 questions across 7 topical areas, which were the evaluation of the MCD, digitalisation, ways to facilitate the cross-border provision for mortgages, ways to contribute to financial stability, lessons learnt from COVID-19, sustainability and other issues.

In the Opinion, the EBA has observed that, overall, since the application of the MCD, consumer protection has become more effective throughout the EU Single Market and that the practices relating to mortgages have been mostly harmonised across Member States. Notwithstanding this, the EBA is also of the view that there are a limited number of issues that need to be addressed (highlighted in the Annex to the Opinion) and therefore, it proposes that the MCD be revised. In particular, the EBA believes that the scope of the MCD should be amended so that the definition of credit agreement includes other credit agreements with similar features and risks to those set out in Article 3 of the MCD (e.g. credit agreements the purpose of which is the acquisition or construction of permanent or secondary residential property or residential leased property, as well as leasing of real estate for permanent or secondary residential property or residential leased property). The EBA also proposes that the text of Article 3(1)(b) of the MCD be amended to oblige the creditor borrower to expressly inform the borrower creditor of the purpose of the loan at the time of making the loan application. Other areas for possible reform include tying/bundling practices, provisions on foreign currency loans and information disclosure at pre-contractual and advertising stages.