Rumen Gechev, MP from the Bulgarian Socialist Party (BSP), has vowed a fivefold reduction in the early settlement charge on mortgage loans.

Speaking Friday in an interview for private TV station Nova TV, he said that a bill submitted to Parliament by BSP on Thursday would improve the existing Consumer Loan Act substantially.

Gechev, as cited by Sega daily, made clear that the changes would guarantee compliance with EU Directives and would boost competition.

"The early settlement charge for mortgage loans will only be calculated on the first 12 months of the payment,” Gechev said.

He explained that this meant that if a person had been paying a mortgage loan for 12 months, they would be absolutely free to refinance the loan from another bank, provided that the interest rate was lower.

He said that the current rate of the early settlement charge stood at 4-5% at most banks and it would be downsized to 1% and would only span the first year.

The socialist MP emphasized that the legal changes were related to an EU Directive and assured that it would not make interest rates more expensive because the second change proposed by BSP affected the formation of floating interest rates.

“The floating interest rate will from now on be determined by market conditions and not by the governing body of the bank. Now it will depend on the market indices, LIBOR on the London stock exchange, EURIBOR for the Eurozone and SOFIBOR in Bulgaria,” he noted.