Rising Interest Rates and the Easing of Mortgage Conditions

The rise in interest rates is now a well-known phenomenon. The European Central Bank is trying to regulate inflation by increasing its rates, but this has direct consequences on the real estate market and access to mortgage credit. Since 2021, mortgage rates have more than doubled, making it more difficult for many buyers to finance their homes. The increase in rates has significantly raised the cost of real estate projects, reducing consumers' purchasing power to levels not seen since 2008. This has led to a sharp decline in the production of credit in 2022.

The Impact of Rising Rates on Mortgage Loans

In the current environment of rising interest rates, it is becoming increasingly difficult for people to access financing. Banks are tightening their requirements and limiting the amount of debt borrowers can take on in order for their loan application to be approved. This has resulted in many potential buyers being unable to get their loan requests approved. The challenges for potential buyers have never been more significant, and with higher interest rates, the barrier to mortgage credit is becoming increasingly hard to overcome.

Towards an Easing of Mortgage Access Conditions?

While rising rates play a major role in limiting access to mortgage credit, banks are considering easing their conditions for granting loans. The regulatory limitations governing the debt-to-income ratio and the duration of loans can hinder access to mortgages, while many financially stable families struggle to get their loan approved. In response to the decline in activity, banks may reconsider their rules to make credit more accessible without jeopardizing their financial stability.

Possible Solutions and Adjustments

A potential solution to ease access to mortgages would be to slightly increase the allowed debt-to-income ratio (currently 33% in Belgium) while extending the loan term. This would allow borrowers to obtain loans with lower monthly payments that better match their financial situation. For instance, extending the loan duration (currently 30 years) could help distribute the loan amount over a longer period, easing the pressure on monthly payments.

However, these adjustments can only be made by the federal government. Without political will to relax the rules, banks would be forced to find creative solutions to continue offering mortgage loans without risking excessive debt.

Conclusion: What Does This Mean for Borrowers?

The rise in interest rates has a significant impact on the real estate market and access to mortgage loans. Securing a mortgage loan is harder than ever, but there are possibilities to ease access to credit. The government and banks will need to work together to find a balance between granting mortgages and maintaining financial stability. Borrowers struggling to get their loan may benefit from easing of rules, but this requires political will and legislative adjustments.