The National Bank of Belgium has imposed new stricter rules on commercial banks regarding the granting of home loans to buy property. According to the NBB, banks can be lax in granting loans, leading to a situation where families find themselves in financial difficulties. For example, if one partner loses a job or become ill, the family can find it difficult or impossible to repay the loan, with the risk of losing their home altogether.
Unlike other countries in Europe, where house prices dropped back during the financial crisis, Belgium has seen a steady rise in property prices – partly a result of the sheer density of the population and the relative lack of expansion opportunity in most of the country.
The continual rise in house prices affects young families most, forcing them to take on onerous debts which banks are happy to agree. The NBB even goes as far as to describe the policy of some banks as “lax”.
Examples include giving loans of 90% of the purchase price in one in three cases, and 80% in one in two cases. Half of all new borrowers are spending half of their disposable income on mortgage repayments.
With the average mortgage at €160,000, banks are therefore sitting on loans of €200 billion, the NBB reports. New rules impose an effective new buffer of €600 million, which means banks must either increase their other business or reduce their lending. Together with rules imposed earlier, that brings the buffer to €1.5 billion.
The result for home-buyers: mortgages will become more expensive, less expansive, or simply more difficult to obtain.