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Developments in mortgage loan origination in the euro area

Author

Listed:
  • Adalid, Ramón
  • Falagiarda, Matteo

Abstract

Loans to households for house purchase appear to have grown at a moderate rate in recent years, despite very favourable financing conditions, the recovery in economic activity and dynamic housing markets. The annual growth rate of adjusted loans to households for house purchase was 2.8% in the first quarter of 2018, having increased gradually from slightly above 0% in 2014. However, when assessing loan developments, it should be noted that loan growth figures are usually reported in net terms, i.e. newly originated loans and the repayments of previously granted loans are considered together because statistics on balance sheet items are derived from stock figures. Given the long-term nature of mortgage contracts, loan repayments have a long-lasting impact on net figures, especially after a boom, and thus obfuscate the prevailing lending dynamics. Against this background, this box presents the results of a simulated portfolio approach which decomposes net lending flows into loan origination and the repayments of previously granted outstanding loans. Examining these two components separately provides a better view of current loan developments. JEL Classification: E17, E44, G01, D14

Suggested Citation

  • Adalid, Ramón & Falagiarda, Matteo, 2018. "Developments in mortgage loan origination in the euro area," Economic Bulletin Boxes, European Central Bank, vol. 5.
    • Handle: RePEc:ecb:ecbbox:2018:0005:5
    Note: 483719
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    File URL: https://www.ecb.europa.eu//pub/economic-bulletin/focus/2018/html/ecb.ebbox201805_05.en.html
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    More about this item

    Keywords

    amortisation rate; housing markets; loan repayments; new lending;
    All these keywords.

    JEL classification:

    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G01 - Financial Economics - - General - - - Financial Crises
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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