Stress Testing the German Mortgage Market

Borrower-Based Macroprudential Instruments in Germany

“…18 The stronger response of unemployment than house prices is designed to capture the fact that the discretionary expansions of Kurzarbeit eligibility and generosity during the COVID-19 pandemic might not repeat themselves in future. Nevertheless, the response of unemployment relative to house prices is weaker in the stress scenario considered here than in Barasinska et al (2019) or the 2023 EU-wide banking sector stress tests.…”

“…The Basel credit gap stood at 5 percent of GDP in 2022Q2. Credit losses on residential real estate loans in a downside macroeconomic scenario are driven by high-LTV mortgages (Barasinska et al, 2019).…”

“…• LTV and DSTI ratios within each bucket, which implies no "bunching" of LTV or DSTI ratios within buckets. We adjust LTVs down by 7.5 ppts to convert mortgage lending values to market values, because Barasinska et al (2019) estimate that an LTV of 80 percent based on the mortgage lending value corresponds to an LTV of 70-75 percent based on the market value.…”

Sustainable Development of the Mortgage Market in Azerbaijan: Commercial Risks of Housing Construction, Social Vision, and State Influence

“…In foreign countries, financing is provided through both market-based financing mechanisms and credit institutions, as well as various mechanisms for accumulating people's savings in the form of non-governmental institutions and organizations. The American model is built on market-based mechanisms for accumulating and placing savings [34], German-uses a mutual lending mechanism with banks [35], and Chinese-uses mechanisms for the accumulation of funds through their transfer by enterprises to residential joint-stock companies, housing savings funds [36]. The different institutional structure of financing models reflects the essential features of the housing finance system, i.e., the specifics of the mechanism of accumulation of savings, such as American-savings through investment and issuance of securities, German-the use of credit and savings institutions, which are banks and mutual lending cash registers, and Chinese-the mechanism for the formation of special funds at the expense of the population with the participation of primary link (enterprises) under state control.…”

Germany

“…The SyRB level has been calibrated using a mortgage market stress test. The approach is top-down, and follows a published methodology (Barasinska, Haenle, Koban, & Schmidt, 2019). In that published exercise, exposure to high LTV loans was a contributing factor for bank losses.…”