New rules on mortgage lending due to come into force in 2022 could make life more difficult for young couples setting foot on the property ladder for the first time.
The rule derives from a directive from the European Banking Authority (EBA) aimed at taming the price explosion on the housing market. The rule actually came into force in July this year, but the National Bank (NBB) gave operators six months to come into line.
The rule essentially consists in making mortgage lenders lend on the basis of a survey, rather than the price asked for a property. In other words, if a seller is asking €400,000, and a survey reveals the proper price to be €350,000, that is the price on which the mortgage is offered.
If the buyer wants to buy the property anyway, they will have to come up with the missing €50,000 themselves. They will also have to pay for the survey, at a cost of €200-€300.
In this way, the EBA hopes to put a damper on spiralling house prices, but critics have spotted a loophole in that logic. Namely: there are plenty of buyers, including those who just sold a €350,000 property for €400,000, who have no need of a full mortgage to pay the price they want to pay.
For those less fortunate, the new system has several drawbacks. It prolongs the process to have a survey done while negotiating with a seller. And then, a survey could make the cost of the property outside the estimate of the survey, making the purchase impossible.
Young first-time buyers will be hard-hit. Few of them have €50,000 spare in case the survey falls short. Especially since buying a house already involves paying 10% of the price out of pocket, and another 10% for registration costs – a fancy name for a tax on home-buyers.
“If this rule had been in force ten years ago, I might never have been able to buy my first home,” one home-owner told De Morgen.
“Certainly in a popular city such as Ghent, the houses are often sold above the estimated value. And there are always buyers on the market who can pay those amounts without the help of the bank.”