2023-05-10 08:10:27
Frankfurt (ots) – The mortgage lending business in Germany has been subject to significant changes since the turnaround in interest rates began in 2022. While the years 2017 to 2021 were characterized by a steady increase in the lending volume, since May 2022 a total of ten consecutive months of sharply declining loan demand have been recorded. In February 2022, new business of just EUR 12 billion was recorded, which was last seen in 2005. Banking expert Steven Kiefer from the global strategy consultancy Simon-Kucher knows whether the increase in new business of almost 27 percent in March recently reported by the Bundesbank indicates a possible trend reversal:
The statistics recently published by the Deutsche Bundesbank on the development of the volume of housing loans to private households show a significant increase in demand in March compared to February. While in February only around EUR 12 billion in new mortgage lending business was concluded by German banks, in March more than EUR 15.2 billion was recorded. Many market participants see this as a possible indication of a sustainable trend reversal in construction financing and the beginning of a return to well-known growth paths.
A look into the past casts doubt on this understandable hope. The volume of housing construction loans provided by German banks is subject to seasonal fluctuations, as can be easily seen from an analysis of the relevant time series by the Deutsche Bundesbank. Accordingly, in the past, the month of March was a traditionally extremely good “construction financing month” and a strong increase in the volume issued compared to the previous month of February was already regularly observed. The March results for the years 2020, 2021 and 2022 were also more than 20 percent above the comparative value for February of the respective year.
So whether it is “only” a seasonal effect or actually the beginning of a trend reversal will become apparent at the earliest when the results for April are presented. A possible bottoming out of the downward movement was already suspected in December 2022, after the December results leveled off at the level of November. However, the issue volume then fell by a further twelve percent until February.
Expectations about overall economic development and the associated demand for mortgage loans are and will remain uncertain and difficult to forecast. Banks should therefore avoid relying purely on external factors that they cannot influence to ensure a successful mortgage lending business. Instead, it is precisely in these uncertain times that growth levers should be activated and stabilized that lie within one’s own sphere of influence. In addition to increasing your own range of interested parties or improving the conversion rate of requested transactions, a customer-centric price and product policy plays a key role here. For example, it can be shown that margin increases of just a few basis points through optimized pricing can already compensate for significant declines in the volume of exposure in earnings.
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