Belgian banks adapt
30-year mortgages are definitely coming back to the fore. It was the big Belgian banks that reintroduced this formula, thus responding to the combined pressure of rising interest rates and property prices. For many young buyers, extending the loan term is the only solution to keep monthly payments at an affordable level.
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For example, Crelan offers a credit called “Durable 30”, reserved for buyers who invest at least 30,000 euros in energy saving measures or who buy a home with an EPC A energy label. BNP Paribas Fortis and Belfius have introduced similar conditions, while ING focuses on young people and singles, regardless of the property’s energy performance. These offers are mainly aimed at first-time buyers, a category of the population that is particularly affected by the current situation.
Extending loan terms is not a new phenomenon, but it is becoming more and more widespread. In 2023, data from BNP Paribas Fortis shows that young borrowers will on average extend their loan term by 3.5 years compared to 2020. The National Bank of Belgium (BNB) confirms this trend: more than 71% of first-time borrowers – buyers chose loans of more than 20 years in 2023, compared to less than half in 2016, according to information from the Flemish media.
The other side of the coin
While the prospect of lower monthly payments may seem attractive, it comes with an important drawback: the overall cost of the loan. The longer the term of a loan, the more the interest amount that must be repaid increases. Het Nieuwblad takes the example of a loan of 250,000 euros. Over 25 years, with an average interest rate of 3.5%, the monthly benefits amount to 1,244 euros. If the future buyer wants to spread the loan over 30 years with a slightly higher rate of 3.84%, the monthly payments will drop to 1,161 euros. The monthly saving of 83 euros may seem attractive, especially for buyers on a tight budget.
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But over the total term, this saving is overshadowed by the increase in interest paid. After 10 years, the borrower who chose a 30-year loan still has to repay 195,000 euros, compared to 175,000 euros for a 25-year loan. Over the life of the loan, the 30-year borrower will pay more than €168,000 in interest, compared to €123,000 for a 25-year loan. An additional expense of 45,000 euros therefore, a significant sum which can weigh on household budgets.
==> Summer Series | Real estate in Belgium: in 30 years, how prices have evolved
