Early repayment penalty: Bank may not take negative interest rates into account
If a home buyer repays their mortgage before the end of the fixed interest period, the bank is usually entitled to a so-called early repayment penalty. This is intended to compensate the bank for the loss incurred if the interest rate on the loan agreement is higher than the market interest rate at the time of early repayment.
The exact calculation of a prepayment penalty has often been a point of contention between banks and their customers. Now the Nuremberg Higher Regional Court (OLG) (case no.: 14 U 2764/22) has ruled in a landmark judgment that a bank may not base its calculation on negative interest rates. However, according to our observations, most banks have done this in recent years. As a result, numerous early repayment penalties are likely to be excessive - customers are therefore entitled to a refund of their money.
Negative interest rates increase early repayment fees
Specifically, the ruling is about the fact that many banks not only calculated that they would lose all interest payments due to early repayment when determining the early repayment fee. Rather, they also assumed that they would have to pay negative interest if they reinvested the money, for example at the central bank or on the capital market.
The ECB's deposit rate for banks was below zero between 2019 and 2022 and even safe bonds often had negative yields. As a result, the early repayment penalty calculated in this way was higher than the total interest payments that the customer would have had to pay for the remaining term of the mortgage.
Compensation calculated too high
But this is wrong, the OLG Nuremberg has now ruled. The bank must reimburse the customer for the portion of the early repayment penalty that is attributable to the negative interest. In this specific case, this amounted to 2,600 of around 33,000 euros. The court's reasoning: The calculation of the compensation is limited to the loss actually suffered by the bank. This means that the early repayment penalty can only be as high as the amount of outstanding interest that the customer has to pay until the end of the fixed interest period or the earliest possible termination date for their mortgage.
As a result of the ruling, most early repayment penalties from previous years have been calculated too high by the banks. Negative interest can amount to up to 30 percent. Customers should try to get this money back. The ruling is not legally binding, as the bank has lodged an appeal with the BGH. However, by the time the highest judges reach a decision, a number of claims may already be time-barred.
Threat of claims becoming time-barred
Claims for early repayment penalties from 2020 in particular are at risk of becoming time-barred by the end of the year. Affected customers should therefore ask consumer protection organizations to check whether negative interest rates were used as the basis for the calculation in their case and whether legal action against the bank is promising.
About the author: Roland Klaus is the founder of Interessengemeinschaft Widerruf. It helps to enforce consumer rights in financial matters and is supported by specialized lawyers.
Source: www.ntv.de
