Mortgage Market in Germany


The financial services industry in Germany calls for a more closely integrated mortgage


credit markets in Europe. The German market for mortgage finance have reached a value of €31.2 billion (US$38.3 billion) in the year 2004. According to the statistics, the German market for mortgage finance has decreased by 10.1% since the year 2003.

Presently a better stance is being marked in the mortgage market of German. So the market for mortgage finance is predicted to grow by 5.9% from 2004 to 2009 and will reach a value of €33 billion (US$40.7 billion).

Mortgage Characteristics In Germany and Some Other Nations

  Home Ownership Rate Predominant Type Of New Mortgage Amortization Period
Canada 66 Variable 40%Initial Fixed 60% 25
Finland 58 Variable 97% 15-20
Germany 42 Mostly Initial Fixed Or Fixed 28
Italy 80 Fixed 28% 10-15
Norway 77 Variable 90% 15-20
UK 70 Initial Fixed 28% Variable 72% 25
USA 69 Fixed 74% 30

The ratio of residential mortgage debt to Gross national product (GNP) is somehow constant in Germany. The ratio of secured residential real estate debt to GNP fell slightly from 23 to 22 between 1983 to 1990. On the contrary the ratio of total residential to GNP fell slightly from 34 to 33 percent.

The difference shows here the top of loans of Banks, advance funding of the Bauspar contracts and other types of unsecured loans for residential housing.

Mortgage Banks In Germany

The mortgage banks fund loans by issuing the mortgage bonds. The Government regulates the mortgage banks and the mortgage bond markets. The approved mortgage banks can only issue the mortgage bonds. Mortgage bank activity is restricted to lend residential and commercial property and to state and local Governments.

In the end part of the 1990s communal loans accounted for 52 percent of outstanding loans, residential property loans accounted for 34 percent and commercial property lending accounted for 14 percent.

The mortgage banks also issue non-PFANDBRIEF mortgage bonds, which fund the mortgages that do not qualify for the PFANDBRIEF cover.

For attracting the customers who perceives that the interest rates will fall further the mortgage banks offer one to two years fixed interest rate bridge loans with options to convert longer term, fixed interest rate loans.

Mortgage Market Funding In Germany

Deposits: -
Funds for housing come from deposits, contractual savings programs and the capital markets. Short-term deposits and current checking accounts continue to offer a stable, low cost source of funding for the banks.

Whole Sale Funding: -
Banks also fund the lending activities through issuance of the bank bonds. The mortgage banks provide direct capital market funding for the mortgages.

Securitization: -
Germany being one of the Europe's largest economy with approximately DM1.9 trillion of mortgages, thousands of banks, and some of the world's most powerful and sophisticated industrial and service corporations. It is one of the leading financial centres in Europe.

A declining tendency was being marked in German's securitization market in terms of volumes in 2001: from a volume of Eur 7 billion in 2000 to approx Eur 5.5 billion in 2001. In the recent years a notional volume of some Eur 15.5 billion was hidden in synthetic deals in 2001. German bank KfW initiated two synthetic securitisation programs like Promise and Provide in 2001.

Mortgage Bond Act In GermanyThe act came in to force in 19th July 2005. It aims at restructuring mortgage bond legislation. This law preserves and fosters the high quality of mortgage bonds. The power to issue mortgage bonds will be extended to all credit institutions, which comply with a certain minimum requirements to safeguard mortgage bond business.

The Association of German Mortgage Banks (VDH Verband Deutscher Hypothekenbanken)

The Association of German Mortgage Banks (VDH) comprises 18 private German mortgage banks. These specialized mortgage banks are major providers of loans to the public sector and capital for private residential and commercial properties. The total assets of some 1.3 trillion euros-equivalent to a 20% market share of Germany's banking industry-mortgage banks make up one of Germany's largest banking sectors.

Mortgage Finance Authority  |  US Mortgage Finance