People in their twenties who are planning to buy their own house are finding it increasingly difficult to get a mortgage loan.
The reason for this can be found in a concurrence of circumstances. Initially there is obviously a sharp increase in the purchase price of real estate in Belgium, but there is also the fact that banks are often not inclined to advance the full purchase price. It is mainly the over-40s who account for the proportion of people in their twenties in the current mortgage market.
Strong contrast with ten years ago
When we look at the current situation in the home loan market, it can only be established that a significant difference is noticeable compared to the past years. Ten years ago, half of the home loan market was still good for people younger than thirty. Today, that is only a quarter. That means halving in a time span of less than nine years. At the same time, it can be established that the share of homeowners older than 40 has doubled. In the year 2007 this share was still 12.7 percent while in 2016 it had already risen to 30.4 percent. The average age of a home buyer also rose from 31.1 years to 36.9 years over the same period.
Everything to do with the affordability of the real estate
The above figures are striking in the basis, not least because the interest on a mortgage loan is historically low. That may well be the case, but the considerably higher purchase price of real estate, combined with the stricter conditions that banks use, makes it not easier for people in their twenties to become owners of their own homes. In particular, the stricter conditions ensure that people in their twenties often have too limited a financial reserve to get their mortgage. This is also evident from the credit applications that are submitted. At forty-year-olds, an average amount of 61 percent is borrowed for the purchase of a house. In the case of people in their twenties, however, in 2014 there was an average percentage of 76 percent. In 2016 this had already risen to 82 percent.
Demand for higher ownership makes the market under pressure
The demand from the banks for a higher own contribution ensures that different target groups get a hard time buying their own home. Make no mistake, this applies not only to young people, but also to people who, for example, have had to deal with a divorce. Fortunately, there is light at the end of the tunnel. Recently, the Flemish government has announced that it will reform the so-called registration fees for real estate. This can be an important step. Particularly for modest housing, the reform could entail cost savings, rising to just 12,000 euros.
Not always the choice of the bank
Many potential borrowers who see their mortgage application rejected are pointing to the banks with an accusing finger. At first glance this seems logical, but in practice it is often not at all the choice of the bank. Financial institutions in Belgium are now also confronted with increasingly stringent requirements from the National Bank. For example, a known requirement relates to the amount of mortgage loans that are provided with a limited, own contribution. The more such loans a bank provides, the higher the capital requirements will be. This is probably one of the main reasons why banks are no longer jumping to grant mortgages with a limited contribution.
Limited savings rates drive people in their forties to the mortgage market
The above ensures that young people in the mortgage market are not exactly easy anymore and then there will be additional competition from the unexpected. The historically low savings rate that is granted on money deposited on a savings account ensures that people over 40 years old and above all often seek refuge on the mortgage market. However, a significant part of this target group would not choose to purchase a new building, but they prefer to restore an older home. This may also be due to the VAT benefit that is attached to it.