Compensation for interest rate risk of a mortgage
If you signed your mortgage after 9 December 2007 and you decide to totally or partially redeem it before its maturity, the bank, in addition to the redemption compensation or fee, may charge you an amount as compensation for interest rate risk. This amount compensates the possible loss for the bank when the market rates at the time of redemption are lower than the rate being paid.
What requirements must be met in order to charge the compensation?
- The amount must be agreed in the contract.
- It can only be charged if the redemption entails a loss for the bank.
- It cannot be charged in variable rate loans that are reviewed every twelve months or less.
- If there is a loss of capital and the review period exceeds one year, the compensation will be the percentage agreed on the capital outstanding at the time of redemption or on the amount of the loss of capital.