An amendment to the Mortgage and Real Estate Act should make it easier for seniors to get a loan. According to Justice Minister Alma Zadic (Greens) at a press conference on Tuesday, banks should be able to focus more on the probability of repayment and the availability of collateral than on the borrower’s statistical life expectancy. For the chairman of the Senior Council, Ingrid Korosec, this is a “milestone against age discrimination”.
Banks currently use statistical life expectancy as a guideline when checking creditworthiness, as loans must be fully repaid at end-of-life, as expected by mortality tables, regardless of existing collateral. In addition, some institutes also set a maximum age. If people are old enough to renovate their apartment or house to get older or simply want to replace their heating system, they may no longer receive a loan for this.
According to Zadic, the amendment, which was based on the German model and is expected to enter into force on April 1, 2023, is intended to regulate the circumstances under which life expectancy can be disregarded when making loans. In the future, it should only be more likely that the borrower will be able to pay the current loan installments during his or her lifetime. In addition, the assets that serve as collateral must be able to cover the liabilities.
“Don’t go to the bank for fun”
With the scheme, seniors (but also young people who, for example, have a lower life expectancy due to illness) may no longer be dependent on the support of family members. “In addition to health care and the health care system, the financial sector is very important for an independent and self-determined life in old age,” says Korosec. “The way to the bank is not done for fun, but to be able to live independently and self-determined.”
The amendment is flanked by other regulations, according to Consumer Protection Minister Johannes Rauch (Greens). In the future, for example, the death of a borrower should no longer automatically lead to the termination of a loan agreement. The heirs must be able to decide to enter into the loan agreement as general legal successors. In addition, the banks are obliged to “reasonably tolerate” – they are not allowed to immediately sell a house that is used as collateral. On the contrary, the heirs should be given the opportunity to use it themselves.
Banks welcome new regulations
The new arrangement is welcomed by the banks. “Seniors are a particularly valued customer group of Austrian banks,” Franz Rudorfer, director of the Chamber of Commerce’s Federal Banking and Insurance Division, stressed in a press release. “However, the current regulatory framework repeatedly does not allow lending, even when there is sufficient collateral, because the primary focus is on the ability to repay from current income.”
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
