Refinancing your home loan will be cheaper in Belgium

Refinancing your home loan will be cheaper in Belgium
Refinancing your home loan will be cheaper in Belgium

A new law promises to reduce the reuse bill presented by banks to their customers. Re-employment compensation is applied when there is early repayment of a mortgage loan or when the contractor requests a downward revision of its borrowing rate. This last type of operation was particularly popular during the previous decade when rates continued to fall.

It is to be expected that many holders of a mortgage loan concluded over the last two years will in turn request such a review. Borrowing remains expensive, but a peak seems to have been reached, announcing a gradual decrease in rates. It is therefore likely that in the more or less near future, customers will want to benefit from reduced monthly payments by requiring banks to review their contract.

Until now, re-employment was accompanied by compensation. The banks generally charged three months of interest upon signing the new contract, as well as administrative fees. The law passed by the Minister of the Economy, the socialist Pierre-Yves Dermagne, puts an end to this compensation.

“Absolutely unreasonable” for banks

The banking community takes a dim view of this. He lobbied intensively with parliamentarians to “not vote for this bill” and “to engage in dialogue with the sector”. According to Febelfin, its federation, “this proposal is absolutely unreasonable and does not take into account the reality of the credit market”. Banks suffer damage in the event of a revision of the interest rate. They have to find their way there. Febelfin brandished a threat in passing: “The adoption of this measure could have a major negative impact on the Belgian real estate market, which is currently stable and characterized by unique protection for households.”

That’s to say? Well, banks could be reluctant in the future to grant their customers re-employment. Over the last two years, the majority have signed for a fixed rate so as not to find themselves captive to the turbulence of the money market. But since the bank is free to grant or not the revision of a rate in the event of internal refinancing, it could veto the signing of a new contract more favorable to its client. The latter would then have to turn to another banking establishment which would apply the usual rate in the event of a new loan, providing a good deal.

Lower processing fees

“The new text requires the bank to offer the customer an amendment to their existing contract. This rider does not generate re-employment compensation. This is the first implication of the measure, writes the daily The Echo. The second implication concerns the processing fees which may be levied by the bank as part of a refinancing. “In the case of a simple amendment, the application fees are limited to half of the legal ceiling for a new credit, i.e. 175 euros instead of 350 euros,” indicates for its part the office of Minister Dermagne.

The elimination of re-employment compensation concerns several types of internal refinancing requests: modification of the interest rate, revision of the duration of the contract, replacement of one repayment method by another, establishment of additional security or even total cancellation or partial of a mortgage.

Variable rate mortgage loans are only affected by the elimination of re-employment compensation in two cases: the suspension of capital amortization and the review of the duration of the contract. In the event of early partial repayment or temporary suspension of interest payment, re-employment compensation remains provided because there is a new contract.

Belgian banks are doing well

According to the latest report on financial stability from the National Bank of Belgium (NBB), the total balance of money managed by Belgian banks stands at 1,156 billion euros. Or twice as much as the national GDP. Banks must, however, prepare to show imagination to maintain this asset. The success of the state bond launched last summer reminded them that they are expected to demonstrate flexibility and a minimum of generosity, especially in terms of remuneration on savings which is still considered too low. . “It is clear that if banks can no longer count on the same volume of savings as before, they will have to review their approach in this area,” said Deputy Governor of the National Bank Steven Vanackere. Adding: “Especially if bills like the one aimed at making credit refinancing even cheaper multiply.”

It remains to be seen what fate will be given to such projects under the new legislature. Alliances between parties formed in opposition to the current Vivaldi government coalition could completely reshuffle the cards.