Mortgage credit: new rules to facilitate borrowing

On 17 February, **Parliament **definitively adopted a bill somewhat changing the situation for **borrowers **with a property project. While there is question of easing certain rules related to loan insurance, this good news may however entail **consequences **detrimental to household budgets. Explanations.

The ability to change borrower insurance at any moment

It often weighs heavily on the overall budget of a mortgage loan – several thousand pounds at the very least. Borrower insurance is certainly essential as it **protects the bank as well as the borrower and their heirs **in the event of death, total or partial disability, or even job loss. That said, the pricing policy of insurance providers can vary considerably.

Until now, it was possible to cancel one’s insurance – often taken out with the lending institution which makes it a condition of granting the loan – only during the first year or at the loan’s anniversary date. It will now be possible to opt for a more advantageous new insurance at any time and without charges. Aside from facilitating the process, this measure will certainly encourage a great number of households to take an interest in the savings potentially achievable on this point.

It is estimated that the **gain for borrowing households **can reach £5,000 to £15,000 over the course of their loan: something that could concretely impact their purchasing power. The measure will come into force from June 2022 for new loan agreements, and in September 2022 for existing agreements.

Removal of medical information for certain loans

Every mortgage borrower has already been given by their lending bank the famous questionnaire, constituting a declaration of honour regarding the health history of the applicant. All medical conditions and illnesses previously experienced must be listed, supported if necessary by documents issued by a medical authority. This information is used for **the medical risk assessment **of the patient and impacts the amount of the insurance premium requested. Any omission or failure allows the insurance provider to absolve itself of possible compensation: the matter is to be taken seriously by all parties.

The novelty introduced by Parliament aims to remove this health questionnaire for any loan under £200,000 taken out by a person who will be under 60 years of age at the end of the loan repayment. Which still represents, according to broker MeilleurTaux, nearly one case in two!

Modification of the right to be forgotten

It was set at 10 years after the end of the treatment protocol for cancer patients, but reduced to 5 years for patients aged under 21. The new text provides for a right to be forgotten period of 5 years for all persons who have suffered from cancer or hepatitis C. Beyond this period, therefore, it will no longer be compulsory to indicate having suffered from these conditions and failing to inform the insurance cannot constitute a reason for refusing compensation. **

The legislator wishes to go further and requires by this law the actors of the Aeras convention (aiming to “insure and borrow with an aggravated health risk”) to reflect by summer 2022 on the rules to be put in place for other conditions. An evolution would be justified given the new treatments that have appeared, which are more effective and reduce the risk of relapse.

A foreseeable consequence on household budgets

Insurance providers will not fail to react to these new rules, seeking to protect themselves against the increase in risks. A general increase in insurance premiums is to be feared, to make up for the lack of visibility on the risk incurred. If previously surcharges impacted only subscribers considered as presenting an increased risk, every contract could be impacted by prudence in the face of the lack of information.

The increase to be expected remains modest, in the order of one to two pounds per monthly payment, as indicated by Crédit Mutuel, the first bank to have already removed the health questionnaire at the end of 2021 for any borrower acquiring their main residence and customer within the bank for more than seven years.

The overall budget over the duration of the loan would thus increase by £240 to £480 for a standard loan taken out over 20 years, with a notable impact for households with the tightest budgets.

The measures announced are commendable and go in the direction of greater equity between bank customers facing risk and insurance. Former patients will see their access to credit possibilities improve. However, insurers are asked to cover potentially unhealthy persons with fewer tools to discover this. If the consequences impact all subscribers, this goes in the direction of societal logic which already sees national insurance, unemployment or retirement financed by all.