Mortgage Insurance: Past and Present

Matthias Dous

The home ownership rate in Germany is one of the lowest in Europe; countries such as Great Britain or the US have achieved significantly higher rates. Housing construction too has been impacted by government aid cuts; when the government allowance for owner/occupiers was abolished, a feverish search began for sustainable concepts that would make home ownership possible for wider sections of the population. As attempts are being made to integrate housing promotion into the state-subsidized system of private old age provisioning, German financial services providers are beginning to secure residential mortgage loans by way of Mortgage Insurance. This insurance product enables lenders to offer residential mortgage loans to borrowers with a substantially lower down payment than was usual in the past. Moreover, Mortgage Insurance can reduce the level of regulatory capital a lender will need to hold under the new Basel II Capital Accord, reflected through the Solvabilitätsverordnung (SolvV) in Germany. It may already be seen today that Mortgage Insurance, which has proven itself abroad for years, is establishing itself in the German market.