2014: a vintage year for mortgage loans

2014 will go down as an exceptional year in BNP Paribas Fortis’ records where the volume of mortgage loans granted is concerned. Following a hesitant start to the year, the continued fall in interest rates on mortgage loans, and changes to the tax regime, like the reform of the housing bonus in Flanders, enabled a remarkable recovery as from the summer.

It is customary to say that Belgians have a brick close to their heart. This saying once again proved true, when we look at the record number of mortgage loans signed in 2014. According to the data issued by the Belgian Professional Credit Union (UPC), over 231,000 mortgage loan agreements were entered into in Belgium last year, representing an amount of over EUR 25.5 billion (excluding refinancing).

BNP Paribas Fortis was not left behind in terms of business volumes, as those volumes were characterised by a net rebound in the number of mortgage loans granted in the last quarter of 2014. Thanks to the last three months of the year, the volume of loans granted actually increased by 13% in 2014 compared with the previous financial year.

“The change in tax deductions relating to the amendment of the housing bonus, which has been granted on a regional basis since 1 January 2015, drove last-minute requests for mortgage loans, primarily in Flanders, so that applicants were able to finalise their plans under the 2014 regime, which was more favourable from a tax standpoint” Greet Van Criekingen, Head of Mortgage Lending at BNP Paribas Fortis, explains.

The increase was boosted by the announcement of a reduction in the housing bonus in Flanders, and by the anticipation of changes to the housing bonus in the other Regions; it was also due to the continued fall in interest rates.

Most of the mortgage loans over 2014 as a whole were earmarked for house purchases (38% of the total volume). The average amount of our loans, for all purposes combined, fell back to slightly below the EUR 115,000 barrier.

Another factor characterised the stages of the year just-ended on the mortgage market, i.e. the large amount of refinancing. BNP Paribas Fortis was not immune to this phenomenon, since we registered a significant surge in refinancing during the last quarter of 2014: 4 out of 10 loans related to refinancing, i.e. double the amount in 2013.

Fixed rates were in demand

Quite logically, customers sought long-term protection against the consequences of a potential increase in interest rates, by ignoring floating-rate formulas and preferring fixed rates. Fixed rates were chosen by 84% of borrowers at BNP Paribas Fortis last year.

Where maturities were concerned, the very low interest-rate level was reflected in shorter loan terms. The average term was 223 months last year, a decrease of 11 months compared with 2013. 7 out of 10 clients opted for a term of less than 20 years. Borrowers appear to want to borrow for shorter periods rather than to repay lower amounts every month. The average monthly payment for a purchase amounted to EUR 638 in 2014.

Young people also have a brick close to their heart

Young people under 30 increasingly want to become home owners. One third of the mortgage loans issued at BNP Paribas Fortis were actually granted to young people. In 50% of cases, would-be buyers under 30 opt for a purchase on the secondary market rather than for a new-build or a renovation. Less than one young person in seven requested a loan intended for the construction of a new property last year.

The average amount borrowed for a property purchase by Generation Y was EUR 158,980, i.e. a slight increase compared with last year (EUR 156,000). Due to their more limited financial resources, young people borrow 84% of a property's value, i.e. a higher percentage than the average for borrowers (73%).

In view of the fact that the average home price paid by young people under 30 in Belgium amounts to EUR 189,000, and given the expenses of around EUR 25,000 (notary’s fees and stamp duty, etc.) relating to the purchase of a property, we believe that the average personal contribution made by our young customers is around EUR 50,000. “This amount obviously comes from borrowers' personal savings, although a large portion of it is equity provided by their family” Nadia El Mehdi, Head of Consumer Lending at BNP Paribas Fortis, explains.

BNP Paribas Fortis expects 2015 to be a transitional year on the property market: “Although the reform of the housing bonus will affect the three Regions to varying degrees, it is obvious that the new Flemish housing bonus will have an influence on the market, given the size of the Region, Nadia El Mehdi adds. This is why we expect home sales to fall slightly during the first months of 2015, although the fall will have no impact on price levels.”