Are We Experiencing a Mortgage Credit Crisis in Belgium?

A brief explanation first. What is a mortgage credit ? It is a loan granted to you by a credit institution and is secured by a mortgage registration on a property owned by the borrower or one of the co-borrowers.

Is it a loan intended solely to allow the purchase of a house or any other real estate?

Not at all. In people’s minds, the mortgage credit is only used to buy a house or real estate. This is true but only partially. Indeed, you can use mortgage credit for reasons other than buying a house.

Thus, many borrowers want a loan and have no other guarantees to offer than to mortgage their house. If the credit institution considers the guarantee sufficient because you own the house and it is free of charges or the new loan is compatible with the ongoing mortgage credit, it will grant you a second loan which will also be a mortgage credit but will rank after the first ongoing mortgage credit.

Thus, a mortgage credit can be granted to finance home renovation work but also to obtain a sum of money with no connection to the house but which you probably could not have obtained within the framework of a classic installment loan (PAT) due to insufficient guarantee.

Does this mean I can always get an installment loan by mortgaging my house? No, because mortgage credit generates significant costs. Indeed, you have to go before a notary and request a mortgage registration in the mortgage registers, etc. This costs money. At Crédit Populaire Européen, we have set this limit at €25,000.00. This means that the financing request must be at least €25,000.00 for us to grant you a mortgage credit.

Can self-employed individuals apply for a mortgage credit? At Crédit Populaire Européen, we regularly work with self-employed individuals. Mortgage credit is often a very effective solution for the self-employed or professionals who face a temporary cash flow shortage because their clients do not pay their invoices or pay them relatively late. The mortgage credit solution thus allows many merchants to avoid having to resign themselves to stopping their commercial activity.

The number of mortgage credit applications fell by 42.5% in September compared to the same month a year earlier, according to figures published on Monday, October 8, 2012, by the Professional Credit Union. The underlying amount of credit applications also decreased by 26.8%. As for the number of mortgage credits granted, it fell by 62.3%. “Clearly, the decline in consumer confidence and the uncertain economic situation are compressing the demand for mortgage credit. However, the granting of mortgage credits currently remains just below the level of 2010-2011, two record years during which credit granting benefited from a boost thanks to government measures in favor of energy-saving investments,” said the professional union.

In fact, successive banking crises explain a certain lack of cash flow in banks and a contraction of credit. Banks have probably become a little more cautious in this area to avoid the collapses experienced in 2008 in the United States and in 2010 in Spain, which is, all in all, a respectable prudential approach.