The Chamber of Labor (AK) and the SPÖ are taking domestic credit institutions to task with a view to the wide interest rate gap. The AK demands that the banks should support borrowers who have come under pressure as a result of the sharp rise in interest rates. The SPÖ locates a market failure and advocates minimum interest rates on savings deposits. The financial institutions themselves recently indicated a concession, at least for the borrowers. The banks have already reacted and on August 23 want to present concrete measures for borrowers who have gotten into trouble due to rising interest rates.
“We are very excited to see how they will do what they are going to offer, we will keep an eye on it,” said Gabriele Zgubic from AK consumer policy in the Ö1 “Morgenjournal” while waiting. “There is the possibility of extending the term, then the monthly loan installments are lower. You can limit the hours, you can see if there is a switch to a fixed interest rate.” Finding solutions here is in the banks’ own interests, according to Zgubic.
1800 instead of 1000 euros monthly rate
“It was a loan installment of 1000 euros at the beginning, now 1800 euros have to be paid, plus quarterly debit interest payments, which are currently 3200 euros – it used to be 320 euros”: This example of a couple in Lower Austria, who, according to Ö1-” Morgenjournal” received a 380,000-euro loan from a financial advisor (35-year term, fully variable interest), shows how threatening the existence of the situation is in many cases. During the consultation, they were never told what it means if interest rates rise, “even a fixed interest rate was never mentioned”. “We were just told that not much will happen with interest rates in the next few years. And with variable interest rates, the rates are lower than with fixed interest rates. We just trusted that it would be okay.”
2300 euros per month instead of 1400 euros
A similar case: 1.5 years ago, the couple bought a small house in Lower Austria with a loan of EUR 385,000, variable interest rates, for 30 years. The monthly repayment of 1400 euros has become 2300 euros a month, and 2500 euros can be expected in the coming month. The amount exceeds the man’s salary, the woman works as an assistant cook. Family includes children and animals. “Deferrals or extensions of the term are not an option for us because we are already repaying well into retirement.” You stand “with your back to the wall” because debts would probably remain even if the house was sold. “We’re annoyed that we didn’t get more information at the time about what happens when interest rates rise.”
Zgubic in the “Morgenjournal”: “At AK Vienna we have several inquiries of this kind per day, and the number is increasing every day.”
Styria and Carinthia
The AK experts from Carinthia and Styria have so far only received a few inquiries from consumers who can no longer afford the loan installments. “Maybe one, a maximum of two a month,” says Bettina Steppwieser, who heads the AK consumer protection department in Styria. “But there were a number of inquiries as to whether the increases in lending rates were correct because they were so massive,” adds Herwig Höfferer from AK Kärnten.
Legal Options
From a legal point of view, unfortunately, there is basically no possibility of a unilateral change, as Steppwieser emphasizes. Step-wise: “Only if the bank is willing to accommodate those affected can, for example, extend the term and possibly restructure the debt.” It is known that some affected borrowers have switched to a fixed-rate loan. “However, this means that a new contract has to be concluded and that there are also fees. An extension of the term might be cheaper, but you have to look at each individual case separately, because the conditions of the credit institutions are determined depending on the individual case, probably also depending on the credit rating. There are no legal regulations for changes to a current loan agreement.”
Class Actions
The class-action lawsuit platform Cobin Claims denounces the banks’ advice on variable-interest loans and calls for a “moratorium on Swiss franc loans”. The club plans to present details at a press conference on Wednesday. The money houses, on the other hand, are protected by Christoph Kirchmair, founder of the credit consulting company Infina, in an interview with the Ö1 “Mittagsjournal”. He sees no careless behavior by the banks. No one in the industry saw the sudden rise in inflation and interest rates coming. The long period of low interest rates since the financial crisis in 2008 is also the reason why the majority of loans in Austria have been granted on a variable basis.
Small penalties for banks
In the Ö1 interview, Innsbruck university professor Matthias Bank sees another possible explanation for the low proportion of fixed-interest loans in Austria in the relatively low fines that are due if you repay a fixed-rate loan early in this country. This makes this type of loan unattractive for the banks. In Germany, where the penalties are much higher, fixed-rate loans play a much more important role.
ECB interest rate policy
In order to combat high inflation, the European Central Bank (ECB) had gradually raised the reference interest rates since mid-2022. Many people who took on variable-rate debt were caught off guard.
Low interest rates on savings
Not only interest rates that are too high are denounced, but also that they are too low: namely on the savers’ side. “Interest rates on loans and overdrafts are exploding, while interest on savings remains almost unchanged,” criticized SPÖ finance spokesman Jan Krainer in a broadcast and called for a statutory minimum interest rate on savings deposits. That is “neither left nor right, that’s reasonable”.
Italy is rowing back
With a view to a much-discussed excess profit tax on bank profits that is being considered in Italy, Krainer is disappointed by the right-wing government in Rome: “Instead of the announced skimming off of excess profits, according to media reports, the government is more likely to take a cuddling course with the banks. “
2023-08-22 15:05:37
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