The National Bank urges the financial sector to exercise more caution in granting risky mortgage loans

The National Bank of Belgium (NBB) is urging financial institutions to exercise more restraint in granting mortgage loans with very high loan-to-value ratios, and to take greater account of households’ indebtedness and their monthly repayment burden. This is the message clearly relayed by the new prudential expectations that the NBB is publishing today for banks and insurance companies offering home loans.

The National Bank had already announced, on 5 September, that it intended to establish new prudential expectations for Belgian banks and insurance companies that grant mortgage credit. This initiative from the NBB, the authority in charge of macroprudential supervision of financial institutions in Belgium, follows on from an analysis it carried out that revealed a further increase in the vulnerability of the mortgage market in this country over the last few years and even in recent months. The European Systemic Risk Board (ESRB) reached the same conclusion in a recent report on Belgium. In this context, the NBB must take preventive action.

The NBB can now reveal the precise content of these supervisory expectations, which come into force on 1 January 2020.

The guiding principle is that banks and insurance companies are asked to be more cautious about granting loans with a very high loan-to-value ratio (the amount borrowed with the mortgage loan in relation to the value of the property), particularly for loans concluded by individuals for a house or an apartment that they will not be living in themselves (buy-to-let). In addition, the NBB is setting out expectations regarding certain combinations of specific risks (pockets of risk), such as the coexistence of high levels, on the one hand, for the loan to value and, on the other hand, for borrowers’ total debt ratio or their monthly repayment burden. The NBB has set thresholds for a series of indicators to serve as benchmarks for granting a mortgage loan. 


‘Loan to value’ thresholds:

  • 90% for owner-occupied housing, with a maximum tolerance margin of 35 % of the loan volume for first-time buyers and 20% for non-first-time buyers (1) that can exceed this threshold value
  • 80 % for buy-to-let, with a tolerance margin of 10 % of the loan volume (1) that can exceed this threshold value

(1) On an annual basis for the volume of loans granted by the financial institution in these individual segments

Thresholds for ‘pockets of risk’ restrictions:

  • A maximum of 5% of the total loan volume may consist of loans combining a high repayment burden (> 50 %) and a high loan to value (> 90 %) (1)
  • A maximum of 5% of the total loan volume may consist of loans combining a high total debt ratio for borrowers in relation to their annual income (> 9) and a high loan to value (> 90 %) (1)

(1) On an annual basis for the financial institution’s total loan volume

This is what the NBB expects from financial institutions for sustainable and appropriate lending. In the event of failure to comply with the expectations, the bank or the insurance company in question must be able to provide the NBB with a reasoned explanation, in accordance with the comply or explain principle.

Margin for manoeuvre

The NBB would like to point out that this macroprudential initiative is by no means intended to prevent young households that do not yet have a lot of capital from buying a home. This is borne out, for instance, by the discretion that banks and insurance companies have to grant first-time buyers a mortgage with a loan to value above 90 %, which they can do for 35 % of the total mortgage loan volume in this segment. So, this leaves financial institutions operating in this (expanding) mortgage market with a wide margin for manoeuvre.

The main objective for the NBB, whose mandate is to protect the Belgian financial system against any possible risks or shocks, is essentially to encourage banks and insurers, as a purely precautionary step, to be more cautious when granting high-risk mortgage loans and to pay even closer attention to the borrower’s solvency.

This new measure comes on top of those measures that already apply for exposures to the real estate market. While the previous measures were designed to ensure the banks’ resilience, this latest initiative is geared more to encouraging banks and insurers to assume a more prudent lending policy.

The NBB’s macroprudential measures are preventive in nature and are designed to maintain the sound health of the real estate market and the related credit markets. In its base scenario, the NBB does not in any way assume that a housing crisis or major downward corrections in house prices are imminent, but it does consider that these measures are necessary to avoid any slippage in the future. Nonetheless, this type of risk can never be ruled out altogether.

Over the last few weeks, the Bank has been holding a round of consultation on the subject for the financial sector. The macroprudential expectations are due to come into force on 1 January 2020.

Overview of the expectations


Type of loan


Tolerance margin
(production allowed above threshold)

LTV limits*



10% (with 0% > 90%)



First time buyer: 35% (of which max. 5% > 100%)

Other: 20% (with 0% > 100%)

Limits for pockets of risk*

All loans

LTV > 90% and
DSTI> 50%


All loans

LTV > 90% and
DTI > 9


* The limits apply to the yearly new production.