Home assoc.: Banks ripping off savings mortgage holders

houe for sale/sold sign

Banks charge a too high interest rate for tens of thousands of homeowners who have a savings mortgage, because they do not take the savings that homeowners build up for repaying the mortgage into account.

This is according to Association Own Home, RTL Nieuws reports.

With a savings mortgage you borrow money to buy a house and then you put money into a savings account every month to repay the loan after 30 years. This is risky for banks, as if you suddenly cannot pay any longer, the bank will be forced to sell your house and may not get the full borrowed amount back. For this reason banks add a so-called risk premium on top of the mortgage, which is calculated based on your debt and the amount borrowed. This risk premium can be waived if you have saved enough money in your savings account for the mortgage.

Banks should subtract the amount in the savings account from the debt, as it ca not be used for anything other than repaying the mortgage. But research by the Association shows that half of the banks do not do so. This results in a too high mortgage interest rate.

"It is incomprehensible that some banks hold on to an extra interest premium with savings mortgages, while the customer often has already built up a hefty repayment and the risk is thus correspondingly lower, or even reduced to virtually zero", the Association Own Home said, according to RTL. "Ignoring this security is simply laxity and we call on them to stop doing so immediately."

According to the association, ING, Delta Lloyd, Achmea, Obvion and SNS always charge customers with a savings mortgage an interest premium that can run up to a half percent. ABN Amro, Rabobank, Aegon and Nationale Nederlanden take the amount built up in the savings account into consideration and reduce the interest premium accordingly, but often only if the homeowner asks for it.

This unjustified risk premium could eventually amount to homeowners paying thousands of euros in too much interest, according to a calculation done by RTL. Say that ten years ago you took out a mortgage of 250 thousand euros, of which 70 percent is a savings mortgage and 30 percent is principle repayment. After 10 years you get a new fixed-interest rate period at 3.5 percent. But because you have also accumulated a nice amount in the savings account, you should pay 3 percent interest instead of 3.5 percent. This means that over the next ten years, you will pay 2,880 euros too much on interest.