how much and who can save

Last year, this support for borrowers was determined by amendments to the Law on the Protection of Consumer Rights – Article 8.4.

However, the manual for these payments appeared much later – the Finance Association of Latvia, together with the Ministry of Finance and the State Revenue Service, developed a special methodology that explains how this money will be paid in practice. (Amendments to the manual are dated 02/29/2024.)

Payment nuances

Compensation will be calculated by creditors (banks), reporting the corresponding amount to the State Revenue Service (SRS), which will directly transfer this money to the borrower’s account.

IMPORTANT: interest compensation will be calculated without the involvement of the borrower. This means that you do not need to write an application either to the bank or to the State Revenue Service.

There is also no need to wait for calls and letters in this regard. If they do, they could be scammers.

How much can you get

The assistance is calculated according to the existing methodology – once a quarter, as indicated by the Latvian Financial Industry Association (hereinafter referred to as the Association).

Bank clients will receive money into their accounts four times: in April, July, October and next January. The currency of the loan received does not matter – those loans that are not in euros will also receive government support.

The amount of support can be:

* 200–270 euros – for loans in the amount of 50,000 euros;

* 630–740 euros – for loans in the amount of 150,000 euros;

* 1000–1240 euros – for loans in the amount of 250,000 euros.

Compensation will be automatically paid to everyone, taking into account a number of criteria:

* the mortgage loan agreement was concluded until October 31, 2023;

* the mortgage loan balance does not exceed 250,000 euros;

* compensation for interest on loans is 30% of the interest payments paid per quarter;

* no more than two percentage points are compensated from the interest rate established for the period (total loan rate);

* support will NOT be received by those borrowers who have loans at a fixed rate (the rate is fixed from the moment the agreement is concluded);

* and one more thing: compensation will be paid only if interest on the loan is paid.

Compensation is NOT paid if the creditor receives interest in the enforcement case based on a court decision.

If interest is paid partially, compensation is calculated based on the amounts actually paid.

If interest payments are overdue

Here are some examples of calculations made by the Latvian Financial Industry Association (hereinafter referred to as the Association).

For example, the monthly interest payment for a quarter is 100 euros, the applicable rate for all months is 7%. As a result, a careful borrower will be able to return 85.71 euros for this quarter.

Another example: in January, February and March, the scheduled payment is 100 euros, the applied rate is 4.8%, and the borrower paid 200 euros in January (including 100 euros of previously overdue interest payments).
As a result, the compensation will be 120 euros.

Another example is with interest-bearing debts: in January, February and March, the payment schedule is 100 euros, the applied rate is 4.8%, but the borrower did not make interest payments in January and February, and in March paid 300 euros (including .including overdue interest payments in the amount of 200 euros for January and February). Total compensation: 90 euros.

If the debtor has several loans

The statutory threshold of EUR 250,000 is calculated for each contract separately, regardless of how many contracts one or more lenders have.

If the loan balance as of 10/31/2023 exceeds 250,000 euros, and in 2024 decreases below the corresponding threshold, then the borrower will be included in the lists to receive compensation with the next payment according to the schedule.

However, if the unrepaid principal amount of the loan increases (for example, an additional part of the loan is issued), the borrower can no longer count on compensation with the next payment on schedule.

About on-lending

If the lender has reduced the interest rate for the borrower in 2023 or established special discounts (for example, the rate added by the bank for a certain period is 0%), then 30% and two percentage points are calculated at the reduced rate (the rate that is used to pay interest in 2024 ).

If, after October 31, 2023, the loan agreement was re-issued, compensation to the new borrower (successor of obligations) is due after the re-registration, if the person is a consumer. The following criterion is used: the loan was issued before October 31, 2023, and then obligations were assumed without registering a new mortgage, but due to objective circumstances there is another borrower (for example, inheritance, divorce).

If the borrower is provided with a NEW loan after October 31, 2023, then no compensation is provided (including when a loan agreement with one lender is terminated, i.e., a change of lender, compensation does not apply to another lender).

If you have any questions

In more detail, the main examples of assistance calculations can be found on the Association home page – www.financelatvia.eu, where methodological material is given – the use of support for mortgage borrowers in 2024 – with amendments from 02.29.2024 (Metodiskais Materiāls Par Hipotekārā kredītņ around sardzības nodevas piemērošanu 2024. gada).

If you have any questions, then, as the Association indicates, you can contact the contact person at the email address – [e-mail].