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Europe

Consumer and #property #lending in the #Eurozone

Below an extract from the latest European Banking Authority (EBA) report on consumer trends.

At the end of 2014, the outstanding amounts on lending for house purchases in EU countries amounted to EUR 5 735 billion in aggregate. Figure 1 shows the development over time, including a 3.2% rise between 2013 and 2014, which is a significant jump compared to the more modest increases in the previous year.

The recent increase suggests that mortgage lending in the EU may revert back to the annual growth rates seen before the financial crisis in 2008.

eba1

The outstanding amounts for mortgages continue to be significant in all MS, but also to vary between them, as illustrated by the 2014 figures displayed in Figure 2. Twenty Member States are below the average, which is strongly influenced by four MS where outstanding amounts are substantially high.

eba2

However, this aggregate trend masks significant differences between MS. As shown in Figure 3, while nine MS have experienced a decrease (depicted below the horizontal line), seventeen MS have seen an increase, including some of 10% or more. Figure 3 also shows that some Member States that registered the higher percentages of outstanding housing loan amounts over Gross Domestic Product (GDP) (depicted in the upper right quadrant) also registered a significantly high growth rate between 2013 and 2014.

eba3

Figure 4 compares the development of outstanding mortgage amounts since 2008 with that of the average interest rate for house purchase loans (with an original maturity of five years or more) in the euro area. Continuous reductions in central bank interest rates have led to a reduction in interest rates for loans, which in turn appears to have helped stimulate aggregate mortgage lending. As rates are expected to continue to be very low for the foreseeable future, the number of mortgage contracts entered into is expected to continue to grow, and so are the concomitant risks of consumer detriment arising from these trends.

eba4

Figure 5 shows that the outstanding amounts of outstanding loan amounts for house purchases at the end of 2014 represented EUR 808 billion, having increased 2.2% from 2013. The trend of deleveraging by banks is evident between 2007 and 2013.

eba5

Finally, the following table compares the development of outstanding consumer credit amounts since 2008 with that of the average interest rate for consumer credit (with an original maturity over 1 and up to 5 years) in the euro area. Continuous reductions in central bank interest rates have led to a reduction of interest rates for loans, however the deleveraging seems to continue in the euro area, while consumers also remain cautious when borrowing.

eba6

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