Exemptions included in the set of macroprudential measures proposed by Austria’s Financial Market Authority to address risks in the housing market are too generous and do not tackle the risk of higher interest rates. Legislative adjustments are needed.

Over EUR 85bn of covered bonds have been issued year-to-date, the most in more than a decade. Covereds are once again the go-to funding tool in a crisis. Senior unsecured funding shut for a while and wider spread differentials added to their appeal.

The methodology update contains only editorial changes and clarifications.

The house price rally goes on, but recent rate increases are making mortgages a luxury. This is affecting demand and, by extension, house prices. Declining affordability among European households will likely halt the rally for the time being.

Bafin’s introduction of a systemic risk buffer highlights risks in the German housing market and was a step in the right direction. However, direct, borrower-based measures are better suited to avoiding risks crystalising when interest rates rise.

We do not expect new credit trends to emerge in 2022. It is more about nuances and if and when current unknowns take centre stage. Subtle spread differentiation will emerge but only when policy rates normalise and the market returns to a new normal.

European house prices may have reached their climax during the pandemic. The 10.6% growth in rolling 12-month prices to Q3 2021 may have been the final sprint. The last time prices grew in double digits was in 2017, a year before they collapsed by 15%.

Austria’s Financial Market Stability Committee confirmed at its 13 December meeting that it had asked the central bank to draw up recommendations for the bank supervisor to introduce legally-binding borrower-based macroprudential measures by mid-2022.

Scope has called consistently for macroprudential measures to calm over-exuberant house prices. The ECB and now the Bundesbank accept that residential housing market risk has increased; Bundesbank cautioning this could pose medium-term financial stability

Societe Generale SFH set the spread on its EUR 1.5bn five-year Green Positive Impact Obligations de Financement de l'Habitat covered bonds at 3bp through mid-swaps on 23 November, having generated over EUR 4bn in demand.