Mortgage credit: Poorly insulated homeowners may have trouble making payments

Mortgage credit: Poorly insulated homeowners may have trouble making payments

The National Bank warns that owners of poorly insulated homes are especially vulnerable to rising energy prices. Some may have difficulty paying off the mortgage. Therefore, there are real financial risks associated with the energy performance of the property.

The National Bank would like banks to systematically collect data on the energy performance of buildings for all new loans granted. Because due to the increase in power, some will not be able to push. This is in fact one of the recommendations issued by the National Bank of Bahrain on Tuesday in its macroprudential report for 2022. These recommendations also focus on higher interest rates and cyber threats.

The recent and current context of the marked rise in energy prices has highlighted the importance of the financial sector taking into account the risks associated with the energy performance of buildings, according to the Bank’s analysis. This is in particular with regard to goods taken as collateral in the course of granting loans.

For the NBB, it is therefore important that “lenders systematically collect data on the energy performance of collateral for all new loans granted”. For existing accreditations, permanent access to regional EPB databases should help gather useful information, the Total Reserve Authority recommends.

The importance of energy performance

For their part, buyers, who in most cases are also borrowers, must take into account the energy performance of the building when evaluating the purchase price, the National Bank suggests. Accordingly, this performance is also likely to be taken into greater consideration in the future in the procedures for granting credit and could have an impact, for example, on the maximum permissible share, if it is not properly reflected. in the purchase price.

With regard to risk-free interest rates and their sharp rise, Belgian financial institutions must take into account different interest rate scenarios in the future and adapt their interest rate risk management accordingly. This is in order to be able to control the potential losses that may result from a new and sudden increase in the order, justifies BNB.

The latter recommends a sufficiently cautious assessment of the possible consequences of high interest rates on the valuation of financial and real assets, on the evolution of the financing cost associated with large demand and savings deposits in the banking sector and on any recovery of insurance contracts.

Finally, the current context in Ukraine and Russia and the increasing digitization of the economy, including financial services, require preparation and constant vigilance of the sector in the face of a potential cyber threat, the National Bank believes. However, there were no major incidents to be reported during the early months of 2022.

The National Bank would like banks to systematically collect data on the energy performance of buildings for all new loans granted. Due to the increased power, some will not be able to push. This is actually one of the recommendations that BNB issued on Tuesday in its macroprudential report for 2022. These recommendations also focus on higher interest rates and cyber threats. The context, both recent and current, of the marked rise in energy prices has highlighted the importance for the financial sector to take into account the risks associated with the energy performance of buildings, the Bank analyzes. This is particularly true with respect to assets obtained as collateral in the course of granting loans. For the NBB, it is therefore important that “lenders systematically collect data on the energy performance of collateral for all new loans granted”. For existing loans, permanent access to regional EPB databases should help gather useful information, the Macroprudential Authority recommends. For their part, buyers, who in most cases are also borrowers, must take into account the energy performance of the building in evaluating the purchase price, suggests the National Bank. Accordingly, this performance is also likely to be taken into greater consideration in the future in the procedures for granting credit and could have an impact, for example, on the maximum permissible share, if it is not properly reflected. in the purchase price. With regard to risk-free interest rates and their sharp rise, Belgian financial institutions must take into account different interest rate scenarios in the future and adapt their interest rate risk management accordingly. This is in order to be able to control the potential losses that may result from a new and sudden increase in the order, justifies BNB. The latter recommends a sufficiently cautious assessment of the possible consequences of rising interest rates on the valuation of financial and real assets, on the evolution of the cost of financing associated with large demand and savings deposits in the banking sector, and about the possibility of this happening. Refund of insurance contracts. Finally, the current context in Ukraine and Russia and the increasing digitization of the economy, including financial services, require preparation and constant vigilance of the sector in the face of a potential cyber threat, the National Bank believes. However, there were no major incidents to be reported during the early months of 2022.

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