For older people, the dream of owning their own home is shattered
At a time when interest rates are low and there's a construction boom, a new EU directive is dashing the dreams of many Germans to own their own homes. A growing number of consumers feel discriminated against – and even politicians can no longer stand idly by.
Because a new EU directive has been in effect in German banking law for a few months, older people, retirees, and pensioners are finding it increasingly difficult to obtain mortgage loans from their banks. This development is angering consumers.
Many feel discriminated against and complain about "how credit institutions sometimes react to loan requests from older people in particular with outright refusal," Lothar Binding, financial expert of the SPD parliamentary group, told the " Süddeutsche Zeitung".
One in four loan applications rejected
According to the Bavarian Cooperative Association, cooperative banks (Volksbanken and Raiffeisenbanken) in Bavaria reject one in four loan applications . A large proportion of these are loans for home or apartment purchases for retirement savings or for age-appropriate renovations. Other financial institutions confirmed to the newspaper "a significant number" of rejections. The trend is rising.
The cause is an EU directive: it is intended to protect banks and borrowers from a real estate bubble. It aims to prevent borrowers from being unable to make their payments.
In the past, it has been shown that consumers in some countries have become indebted "far beyond their capacity to bear debt", often resulting in the loss of their home," according to a letter from the Federal Ministry of Finance and Consumer Protection to members of parliament.
Banks demand higher collateral – even from high earners
For this reason, banks are demanding higher levels of collateral. Consumers must either have substantial equity or demonstrate creditworthiness with an above-average monthly income . However, figures from credit institutions show that even the affluent population is being excluded. Employees with secure and well-paid jobs would also be denied loans, as would employees in their mid-50s who apartments or houses as retirement savings , reports the SZ.
About the author
Harry Mohr
Real estate agent (Chamber of Industry and Commerce)Harry Mohr, author of this article
