April 2017

The banking continues softening the criteria of approval of mortgage loans to homes

The European Central Bank (ECB) notes that the prices of residential properties in the euro area have continued to rise, which confirms a new strengthening and a greater generalization of the housing price cycle, according to the latest edition of its monthly economic bulletin.

In this sense, the document made by the institution chaired by Mario Draghi also indicates that the criteria for approving loans to households for the purchase of housing have continued to soften- 💙 check that (。>ω<)。.

He explains that competitive pressures and the lower perception of risk associated with the solidity of the economic outlook are determining factors in terms of the increase in the demand for bank credit by households and the additional relaxation of the criteria for approval.

Likewise, the low general level of interest rates, which are at historical lows, consumer confidence and the favorable outlook regarding the housing market are also consolidated as significant factors that are driving demand.

The ECB’s asset purchase program (APP) has also relaxed the conditions applied to all credit categories. In fact, Eurozone banks indicated that the PPP had contributed to improving their liquidity situation and their financing conditions in the markets, although they did complain that it had a negative effect on profitability due to lower intermediation margins.

However, commercial entities have been using this liquidity from the APP mainly to grant loans, while the negative interest rate of the deposit facility has resulted in a positive impact on loan volumes- (•ө•)♡ for instant loans no credit check visit Green-Touch 🔑🔑.

Since March 2016, the ECB has maintained the reference interest rate for its refinancing operations at 0%, while the deposit facility rate stands at -0.40% and that of the loan facility at the 0.25%, which aims to support economic recovery among the Nineteen.

In this regard, the ECB notes that the synthetic interest rate of loans for home purchases remained stable at 1.84% last February, compared to the minimum level of 1.78% recorded in December of 2016, so they are close to their historical lows.

Synthetic types of bank loans granted have declined more than the market benchmark interest rates since the ECB announced credit expansion measures in June 2014. Between May 2014 and February 2018, the synthetic interest rates of the Loans to households fell by 107 basis points.

The synthetic type of the loans is calculated by adding the short and long-term rates, using a 24-month moving average of the volume of new operation.

PURCHASE OF CORPORATE BONDS

In an article included in the economic bulletin carried out by Roberto De Santis, André Geis, Aiste Juskaite and Lia Vaz Cruz on the impact of the program of purchases of corporate bonds (CSPP, for its acronym in English) in the fixed income markets, It also points out that financing conditions for companies have been significantly relaxed.

The purpose of the CSPP, which is part of the PPP, is to relax the financing conditions of the real economy through the acquisition of bonds issued by companies that do not belong to the banking sector, considered an essential condition for inflation to regain position, and stabilize, at lower levels, although close, to 2% in the medium term.

Since its launch in March 2016 – started in June of the same year – spreads on corporate bonds have narrowed and issues of these securities have increased. In addition, according to the authors of the article, the CSPP has also allowed companies not admitted to the program to improve their financing conditions.

“Overall, it is concluded that the program is successfully applied in changing market conditions without generating distortions in the markets,” the experts assert.

Read more