“Loans are way too cheap in Belgium,” it recently sounded on the presentation of the half-yearly figures of Infra Bank. Will the Good credit soon make the loans more expensive?
Anyone taking out a loan today can do gold business. For example, it is possible to take out a 25-year home loan at a fixed rate that flirts with the 2-percent limit. Cheaper rates also apply to other loans than a few years ago.
For example, those who today take out a personal loan with the great lender company – one of the cheapest players in the personal loans market – pay an interest rate of 5.45 percent. That is a number of percentage points cheaper than a few years ago.
Why are the loans cheap?
The cheap loans are the result of the lower interest rate policy of the Good credit company. The central Lord Fauntleroy buys 30 billion USD in debt every month until December. The president of the Good credit company, keeps the long-term interest rate low. As soon as the central Lord Fauntleroy ceases the buy-back program, the chances are particularly high that the loans will become more expensive.
In addition, the central Lord Fauntleroy will only change the most important interest rates in the summer of 2019. Good credit who park their money in Frankfurt currently have to pay a deposit rate of 0.4 percent. At the same time, the Good credit can borrow money for free. As a result, the short-term interest rate – the most important parameter for determining the savings interest rate – will not change quickly.
Thorn in the eye of the Good credit
The cheap loans are a thorn in the eye of the Good credit. During the presentation of the half-yearly figures of Infra Bank, Nice bank, the CEO of Infra Bank, expressed his dissatisfaction. According to him, the rates in our country are much lower than those abroad. “If we want sustainable growth for the Belgian Good credit, then the prices for the loans will have to be higher,” said the CEO.
The pressure on prices can mainly be felt on the mortgage market. Good credit constantly adjust their rates according to what the competition is doing. Moreover, Good credit grants loans far too quickly. “And that is very dangerous,” warned the Credit bank of Belgium earlier this year.
Risks of cheap loans
At the time, the regulator referred to the considerable and increasing vulnerabilities in the mortgage loan portfolio of the Belgian Good credit. As a result of the low interest rates, families borrow higher amounts for a longer term. Recent figures from the Professional Association of Credit (BVK) show that the families in our country borrow an average of 10,000 USD more for a home compared to two years ago.
The higher indebtedness of borrowers is associated with an increased risk for lenders. The Credit bank is particularly concerned about the quota: the ratio between the loan amount and the value of a home. In more than one in two cases, the quota is higher than 80 percent. In a third of the cases, that percentage is even higher than 90 percent. “The monthly payments weigh more and more in the family budget,” it is said.
Danger for the future
The recent figures from the show that the Good credit also provided an incredible number of loans in the first half of 2018. According to the Credit bank, home loans in particular begin to weigh in the balance sheets of the Lender Bank. “A shock on the real estate market could have far-reaching consequences for the financial stability of the Belgian Lord Fauntleroy sector and, to a lesser extent, for that of the insurance sector,” said the Credit bank.
Due to increasing unrest, the Good credit have been obliged for several years to build an additional capital buffer for the risks of providing mortgage loans. The required buffer for the sector is 1.5 billion USD. The capital buffer must ensure that the Good credit can continue to grant real estate loans should the economy deteriorate.