The EMF study on Non-Performing Loans 2010 looks beyond the raw data to reveal significant dependencies between loan performance and macro-economic conditions. It finds that one defining aspect of today’s mortgage markets is the historically low level of mortgage interest rates.
The EMF Study on Non-Performing Loans 2010 looks beyond the raw data to reveal significant dependencies between loan performance and macro-economic conditions. With some market data dating back to the early 1990s, it was easy to observe that high mortgage interest rates and high unemployment were accompanied by higher rates of defaults. This was true for the UK, Spain and Denmark where arrears in the early 1990s were twice and sometimes three times larger than the levels recorded now in the aftermath of a global credit crisis. One defining aspect of today’s mortgage markets is the historically low level of mortgage interest rates, a direct result of the expansionary monetary policy pursued by the ECB and national central banks. This is in contrast to the high level of rates prevalent in the early 1990s. For instance, for the BoE policy rate there was a gap of 13 percentage points between 1990 and Q2 2009 rates.
Another aim of the study was to arrive at cross-country comparisons for the markets surveyed. But this rapidly became an exercise in frustration. The different legal frameworks underpinning mortgage markets and the different definitions and methods for calculating arrears, doubtful loans and repossessions quickly ruled out a straight comparison.
The newsletter also covers the following issues:
· CML leads lender response on UK regulatory reform
· ECBC Covered Bond private placements
· News in brief
· Agenda
© EMF
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MORTGAGE INFO - February 2010 (2).pdf
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