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Evolution of Loan-to-Value policies in Belgium and their potential impact on default rates

Bouvet, Timothée
(2024)

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BOUVET_46261700_2024.pdf
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Details

Supervisors
Vrins, Frédéric
Faculty
Louvain School of Management
Degree label
Master [120] : ingénieur de gestion, à finalité spécialisée
Abstract
This study assesses the impact of loan-to-value (LTV) policies on mortgage default rates in Belgium. First, it compares housing affordability in Belgium with that of economically similar countries such as France, Denmark, Finland, Sweden, Canada and Israel. We will see that Belgium is in the middle of the pack when it comes to housing affordability, with a theoretical time to obtain a mortgage of 2.88 years. The analysis focuses on policy changes in 2016 and 2020 in Belgium. The results show that policy adjustments in 2016 and 2020 had no significant effect on mortgage default rates. Statistical tests, including equality of variance tests, Student’s t-tests and Diff- in-Diff models, indicate that policy changes had no significant impact on default rates in Belgium compared to France. These results raise questions about the effectiveness of LTV policies as a tool of financial regulation. Other factors, such as general economic conditions and income levels, appear to play a more decisive role in the financial stability of borrowers.