In fact, a mortgage loan with a fixed rate offers families complete certainty about their monthly repayments and ensures that the repayment of the loan does not become more expensive due to interest rate hikes. In contrast to other European countries, this contributes to the stability of our housing market and the rate of overdue payments of mortgage loans is historically low (0.64%; Figures NBB). Consequently, a sudden surge in interest rates does not put our households in trouble. This prevents financial turmoil and prevents social dramas for Belgian borrowers, unlike in other countries such as the UK, Spain and Italy.

Just recently in the UK, hundreds of thousands of families got into financial difficulties due to the increase of the variable interest rate of their credit agreement, while in Belgium several billions of euros of purchasing power were safeguarded in 2023 due to the protection offered by the fixed interest rate against interest rate hikes. The industry fully assumes this cost in favour of consumers.  

The decision to choose a fixed interest rate also means, in principle, that it is fixed, and therefore remains the same, when interest rates fall. In principle... because the borrower who wants to benefit from an interest rate drop always has a choice in Belgium:

In brief, the Belgian fixed-rate mortgage loan is already only ‘fixed’ in case of a rise in interest rates and becomes ‘variable’ at a limited cost in case of a fall in interest rates. The lender is not obliged to respond positively to the request for internal refinancing. In practice, however, we see this happening on a massive scale when interest rates fall. In that case, fair compensation for the lender's loss of future income is sought together. To compensate for the revision, today usually a maximum three-month reinvestment fee is requested. This only partly covers the damage caused by the breach of the current agreement.

Indeed, lenders have to finance themselves for the long term and protect themselves from these risks of interest rate falls, while they are unable to break their commitments made. Between 2014 and 2022, a huge wave of refinancing took place in Belgium, releasing hundreds of millions of euros of purchasing power for consumers. As mortgage loans in our country have an average duration of 20 years, borrowers enjoy low interest rates for a long time, even if interest rates rise. A special protection for homeowners' purchasing power.

The Federal Parliament is considering a bill on Thursday the 2nd of May that would prohibit lenders to charge such reinvestment fees of up to 3 months.

This proposal is absolutely unreasonable and does not take into account the reality in the credit market, where lenders are actually affected when an interest rate is revised. Moreover, this legislative initiative could endanger the refinancing of mortgage loans with a fixed interest rate. The question arises to what extent lenders will still be inclined to revise fixed interest rates intermediately without limited compensation.

Febelfin emphasises that the adoption of this measure could have a major negative impact on our currently stable Belgian housing market, characterised by a unique protection for our families. The industry therefore calls for not voting this bill now and for dialogue with the sector to better identify and understand the possible consequences in order to come up with a more balanced proposal.