National Bank issues warning about cheap mortgages

The Governor of the National Bank of Belgium Jan Smets has said that Belgian banks should be aware of the risks of them granted mortgages with very low rates of interest. Although not wishing to over-dramatise, Mr Smet says that it leaves the banks vulnerable.  

Banks know that customers that take out mortgages are very loyal. Consequently, they try and lure potential customers with low mortgage interest rates.  

However, the Governor of the National Bank warns that "I think that we have a healthy real estate market, but there are some areas in which it is vulnerable”.  

The Belgian real estate market didn’t suffer ill-effects from the 2008 financial crisis. Since 2000, taking into account inflation, property prices have risen by almost 75%.

Those buying property are lending increasingly greater sums of money. Half of the mortgages issued to Belgian lenders cover more than 80% of the value of the property purchased. In a third of cases this is more than 90% of the value. The average amount lent is 160,000 euro.

Mortages account for 1/5 of banks assets. In order to protect themselves from any ill-effects that might arise from a real estate crisis, since last month the banks have been obliged to set aside and 600 million euro for a buffer to cover mortgage risks. This is in addition to the 900 million euro already set aside.  .  

"We have asked the banks to set a bit more capital aside in case risks should emerge on the real estate market”, Mr Smet explained.

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