Legal difficulties for the building societies of the day of truth is approaching

Next week, the Supreme Court decides on the dismissals of old contracts. The low-interest rates threaten the building societies.

The building societies are in a tight spot. The low-interest rate environment complicates their business, depress revenues. And now they are preparing just the most loyal customer’s legal difficulties. Many savings customers have completed in the 1980s and 1990s, contracts with annual credit interest of up to 4 percent.

Instead of requesting the savings loans from the grant date of maturity, leave many untouched the money and take the interest with. The building savings is misused as an investment, so the accusation of many building societies. You terminate the contracts because they can no longer serve the high-interest rates. According to industry estimates, they have canceled 260 000 savings contracts in recent years that are a ripe allocation for at least ten years.

Whether such termination is effective, which decides on Tuesday for the first time Federal Court (BGH) in a lawsuit against the Bausparkasse Wüstenrot (Ref .: XI ZR 272/16). A spokesman of the Association of Building Societies announced that 101 decisions in the appeals process have so far been considered in favor of building societies.

A savings agreement is not a simple construction

In four cases, however, the savings customers were right who had successfully appealed against her dismissal. decide on one now has the Supreme Court. In the case, the applicant and her late husband had been completed in 1999, two savings contracts with a contract sum totaling 200,000 DM. These were ration ripe 2,001st Both balances are an interest rate of 2.5 percent. Under the contract, the Bausparerin might even get 4.5 percent if they waived the loan or wanted a higher rate loan.

A savings agreement is not a simple construction; he is legal as a loan in under § 488 et seq. (BGB) in the Civil Code treated. In the savings phase, the customer of the building society entrusts the money, this is now the Borrower. The banks operate in this time with the balances of the customers. Beyond a certain threshold, normally it is to reach the minimum savings assets, the bank indicates the allocation maturity. This is the first date on which a customer can accept the offer on the entire contract sum – legally, he will become the borrower and will have to repay the interest loan later.

The building loan corresponds to the difference between the contract sums and the savings. If a savings customers have saved up the whole contract sum, the building society may terminate the contract. Because the purpose of the savings agreement, a soft loan, can not be achieved. These terminations are undisputed. In the case of a dispute – and also in the case against Wüstenrot – not demanding the customer contract sums to give. Wüstenrot announced the woman in 2015 and referred to a standard whereby it can withdraw not fully desperate contracts ten years after complete reception (Article 489, paragraph I no. 2 BGB). Because the wording of the law and the reality of the case do not harmonize, Wüstenrot refers to the time of allocation of maturity 2,001th

Many Courts of Appeal (OLG) follow this legal opinion. But a Senate Stuttgart presented with two decisions in 2016 against this trend. According to the judges’ statutory right of termination of ten years after receiving the loan on savings contracts does not apply. In addition, building societies are not worthy of protection in the accumulation phase. You can require customers the maximum term by contract – exactly the Wüstenrot have however failed the Stuttgart Higher Regional Court ruled.

Low-interest rates threaten the business model

A voluntary taken over interest rate risk cannot be passed on to home savings. Whether the bank’s Senate on BGH, which always meets consumer-friendly decisions, even looks like it will show next week. Last year, the building societies had already suffered a serious defeat when the Supreme Court had declared the flat-rate loan fee unlawful. Consumer advocates do not consider the savings customers in the savings phase as lender of the building society because it is for the building loan not a loan contract within the meaning of the Civil Code. Rather, the savings customers acquire the right to a loan.

The low-interest rates threaten the business model of building societies, forcing them to act. Currently wants hardly a savings customers a savings loans whose terms have been established years ago still at higher interest rates. The cheaper loan also offers the banks. Conversely, savers are glad to still to maintain high-interest rates, and therefore irritate old savings contracts made as long as possible.

Assets Question: What overlook individuals in borrowing

Low lending rates also pose risks to individuals. You should pay particular attention to the term of the loans and the amount of interest on debt rather than on low rates and annual unscheduled.

The current low lending rates are dangerous for many individuals in several ways. By far the biggest risk is the indebtedness due to poor credit rating. The second danger is the long-standing debt when the repayment is too low. And the third danger is the overpricing of loans.

This is evident in the following example: An investor is 37 years old. He needed to buy an apartment, which cost about 200,000 euros and will even be used even 150,000 euros. Loans of this size currently cost about 3 percent when the interest rates for 15 years to be committed. The monthly rate is 500 euros if the repayment is set at 1 percent. That may be tempting at first glance, because the 500 euros may correspond to the saved rent, but on closer inspection is the credit full of pitfalls.

The most sensitive issue is the credit rating of the investor. If the 500 Euros are to lift only with great difficulty, there is a risk that the borrower falls over at the first gust of wind. If the man in five years needs a new car, or in ten years, some time will be unemployed, he can get into financial difficulties. Either the car is not affordable or apartment loan is in default. Also looming in the distant future – specifically in 15 years – the risk that the connection interest rates are higher than the current contractual interest. In a Prolongationszins of 6 percent, the new monthly rate will climb a high probability of at least 719 euros, and the investors may be charged when the fund will bear no more than 500 euros, be fatal.

share working life into two halves

The other circumstances give cause for thought: The investor is 37 years old. At this age, an initial repayment is smoother madness. Lending rates of 3 percent and repayments of 1 percent result in maturities of 46 years so that the private citizen until the 83rd birthday would have to scroll down on the table of bank credit rates. There may be cheerful natures, who see it as a problem, but sober observer will wonder what these borrowers with their money.
If any financial surpluses are available on the monthly loan installment addition, the apartment should not be bought because it exceeds the possibilities of the investor. This inevitably leads to the question of how much money should be for the interest and repayment of the loan available. The answer is simple, but the consequences are difficult. The investor is faced with two tasks: he wants to buy the apartment, and he wants so he has to save up free capital for retirement. Against this background makes sense to share the remaining work life in two halves. It was not until the loan is repaid, then the free capacity is built.

Excessive borrowing rates for flexible repayments

In this case, the investor will work for another 30 years. Consequently, it stands for the two tasks every 15 years available. The specification of the runtime has in a loan of 150,000 euros and a target rate of 3 percent per year total of 180 installments of 1,036 euros result. If the credit rate does not exceed a quarter of disposable income, net income of 4500 euros is required. These are gross Euro 7500, so that clear that low-interest rates may be a gift, but maybe an invitation to people who earn less. Otherwise, the financial collapse is imminent.