Home Ownership

Rules Blamed for Mortgage Slowdown

Neu erbaute WohnhŠuser stehen am 14.03.2014 in DŸsseldorf (Nordrhein-Westfalen) im Stadtteil Mšrsenbroich. Foto: Horst Ossinger/dpa [ Rechtehinweis: Verwendung weltweit, usage worldwide ]
New homes in Düsseldorf are still out of reach for many.
  • Why it matters

    Why it matters

    New E.U. lending rules that are intended to stop consumers from getting too deeply into debt are in place, but some mortgage banks say they are overly restrictive, preventing some would-be buyers from entering the property market.

  • Facts

    Facts

    • In March, new E.U. guidelines on mortgage lending went into force in Germany that are intended to prevent consumers from becoming overburdened with debt.
    • Figures released by the German savings bank association suggest mortgage lending fell by 9 percent in the first half of 2016, with the association blames on the new guidelines.
    • Consumer groups say the new laws are badly drafted and set unexpected traps for consumers, but some lenders say the banks are using the regulations as an excuse to hide their own reluctance to lend.
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    Audio

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In an era of ultra-low interest rates, financing property purchases is among the few reliable revenue streams banks have left. For consumers, a mortgage is a cheap way to invest in a home of one’s own. For banks, the business is consistently profitable. But while Germany is going through a real estate boom, many would-be buyers can’t take part.

New data shows that mortgage lending this year seems to have dipped noticeably. Some financial institutions blame this counter-intuitive slowdown on tighter E.U. lending laws, but others suggests bigger lenders are using the new rules as an excuse not to loan money.

According to the German Savings Banks Association, or DSGV, mortgage lending among 408 member banks fell 9 percent to €24 billion ($26.81 billion) in the first half of 2016, compared to the same period last year.  The decline is not the result of reduced demand in the private real estate market but changes in lending laws, the association claims.

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