The EBA has published its final report setting out the formula that creditors will be required to use when calculating the benchmark rate under Annex II to the Mortgage Credit Directive (2014/17/EU).

Under certain circumstances the Mortgage Credit Directive requires creditors to use a benchmark rate specified by the EBA for the illustrative examples in the European Standardized Information Sheet (ESIS) for variable rate mortgages (specifically, the annual percentage rate of charge (APRC) and the maximum installment amount). This is intended to help consumers compare the characteristics of credit products.

Instead of publishing a specific pan-European rate the EBA has produced a formula for calculating the appropriate rate which takes into account national circumstances. The EBA formula includes an underlying rate specific to each member state (that is, the European Central Bank (ECB) rate for Eurozone countries and the national central bank rate for non-Eurozone countries). This means that each member state will have a bespoke EBA benchmark rate that will remain up to date over time. The EBA rate will only apply where no national rate has been set.

The decision will be translated into the official EU languages, and will be published on the EBA website and in the Official Journal of the European Union (OJ). The EBA formula will apply 20 days after its publication in the OJ, but can be used by creditors before this date.