Mortgage loan

What are the trends for the mortgage market in Europe?

Posted by MoneyController on 04.01.2022

Many people will have wondered whether, with 2022 and changes in monetary policy in some countries, anything could change on the mortgage front.  It is therefore worth reporting some data and considerations from the European Mortgage Federation's (EMF) very comprehensive study, Hypostat 2021.

The mortgage market in Europe

How important are mortgages in Europe? They are very important, accounting for 46.1% of GDP. The Hypostat 2021 data speaks of 6.17 trillion for the Eurozone and if you add the UK, Iceland and Norway of 7.83 trillion. Such a high volume of mortgages has not been seen since the 2008 financial crisis. The reason for such a surge lies in large part in the very cheap interest rates charged by the ECB and, to some extent, also by the Bank of England. These interest rates contribute directly to the calculation of mortgage rates. In 2020 alone, mortgage lending in the Old Continent grew by EUR 1 trillion.

Future trends in mortgage prices and rates

Over the last ten years, even despite the pandemic, house prices have risen virtually across Europe, with peaks of +120% in Hungary, +80% in Luxembourg and +60% in Germany. Mortgage and construction rates, on the other hand, have remained very low for the reason mentioned above: the central banks' super-cheap interest rates. In addition, as Dr. Klein's expert Michael Neumann points out, many banks and credit institutions are competing with each other, which is all to the benefit of customers. In some cases, some providers are offering fixed rates of up to 30 years.

As long as central banks maintain a low interest rate policy, the mortgage situation for countries with low spreads (another direct contributor to the interest rate calculation) should remain affordable throughout 2022. Instead, homebuyers should be concerned about price growth in the housing market, which shows no sign of stopping. In addition, an important trend that is gaining ground should also be taken into account, namely the greening of real estate. EMF itself is promoting the emergence of "green mortgages", i.e. loans aimed at financing properties with a reduced environmental impact, especially from an energy point of view. It is clear that customers stand to gain, as attractive financial incentives are already in place.

Mortgages in relation to property in Europe

In total, 69.3% of the population in Europe owns a home. However, only 25% of owners have taken out a mortgage. In some countries, concentrated in Northern Europe, the volume of mortgages per inhabitant is increasing. In the Netherlands, for example, 60% of homeowners have a mortgage. In other countries this figure drops considerably, as in Italy, where only 15% of homeowners have a mortgage. This is due to the more frequent use of liquid assets or to the fact that in some countries the tradition of keeping properties as an inheritance is stronger than in others.   

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