EU27 mortgage market grows to EUR 6.4 trillion in 2010

The mortgage market of the 27 countries that make up the European Union grew by 4.9% to €6.4 trillion in 2010, the largest annual expansion since the credit crisis began in 2007, according to the European Mortgage Federation.

The growth is measured by the outstanding volume of residential mortgages and this higher growth rate led to a 0.4% rise in aggregate EU27 residential mortgage lending to GDP ratio, resulting in 52.4% overall.

EMF’s head of statistics, Alessandro Sciamarelli, said:  “A moderate albeit fragile recovery in the macroeconomic environment, coupled with mortgage interest rates down to record lows, provides the background for mortgage lending activity throughout 2010.

“Most new lending markets recorded increases compared to 2009, although remain far from pre-crisis figures with a levelling off observed in the second half of the year. The final picture has not changed drastically, remaining characteristically diverse across the EU.”

The dramatic decline in residential construction activity slowed down in 2010, yet in spite of this moderation, volumes of activity remained well below pre-1998 levels.

Notwithstanding the continued fall in building permits and housing starts, there is still excess supply in some EU countries which suggests that the correction is likely to continue.

House prices in Europe in 2010 followed three main trends:

• vigorous recovery in Austria, Sweden, France and the UK (albeit with a clear levelling off in quarterly growth rates in Q3 and Q4 2010);
• lower growth rates in Belgium, Germany, Italy, Luxembourg and Malta;
• continued house price recession in Cyprus, Ireland, Hungary and Spain.

Nominal house prices increased by 0.7% in the EU27 on average and a growth of 1.8% was recorded in the euro area.

Over the year, mortgage demand was stimulated by the continuous supportive monetary policy stance of the European Central Bank and other central banks.

In Q3, growing inflationary pressures and increasing tensions on some of the peripheral euro area sovereign debt markets led to monetary policy tightening, causing marginal increases in mortgage interest rates.

For a detailed set of data on all EU mortgage and housing markets, download Hypostat 2010 from the EMF’s website www.hypo.org.