caution. since interest rates remain at historic lows, monetary policy normalisation in the medium term will inevitably have an effect on mortgage payments. 9 / 15 we should not forget that, although the proportion of fixed rate mortgages has recently reached 40 % of all new transactions, 87 % of the existing stock of mortgage loans remain linked to a variable rate, so that our mortgage market continues to be particularly sensitive to rising interest rates. consequently, we take a positive view of the facilities to encourage conversion of variable to fixed rate loans introduced by the new law. in any event, it is worth mentioning again that at no point in the crisis did non - performing mortgage loans exceed 6 % of the total. consequences of the application of the law on access to housing the crisis has also reminded us again that the worst business to do is to grant a mortgage to a person who, a priori, is unlikely to fulfil their payment obligations. in economic terms this is bad business for the customer concerned, but also for the institution, which will have to deal with an irregular loan and, possibly, following a lengthy and difficult judicial process, assume the cost of having a property on its books, managing it and paying all the attendant costs. finally, given the painful situations we have lived through recently, there is no need to spend much time discussing the social effects of such business. precisely because of the asymmetric positions of the lender and borrower in the contractual relationship, the new law provides that incorrect assessment of solvency will not entitle the lender to terminate, rescind or modify the loan agreement. that is to say, the responsibility for analysing the ability to pay falls entirely on the institution, and not on the customer. the law also protects the debtor who is unable to make payments, by making enforcement of mortgages in the event of default more complicated. naturally, all these legal provisions reinforce the idea that extreme caution must be exercised when granting new loans. at the same time, it is common knowledge that the law has assigned most of the costs associated with granting a mortgage to the institution. some institutions have even decided 10 / 15 to assume the cost of appraisal as well, which is in practice the only one that the law places upon the customer. in addition, the requirements relating to the minimum number of instalments that must be due and payable before it is possible to initiate judicial enforcement proceedings, will delay the recovery of debt outstanding on

from a supervisory viewpoint have changed since 2004. the blue line represents the median loan as a proportion of the appraisal value ( the so - called “ loan to value ” - ltv ), while the red line shows the median loan as a proportion of the transfer price, according to the transfer deed. the chart shows that the ratio between the median loan amount and the transfer value of the dwelling as stated in the transfer deed was very high and rising during the years leading up to the crisis. after the crisis, the ratio declined gradually, until it stabilised at around 80 %. by contrast, the ltv was much more stable over the same period. the differences between these two ratios reveal two things. first, that the appraisal value was clearly higher than the transfer value before the crisis, the difference between them having subsequently been reduced. second, that the appraisal value has been more cyclical than the transfer value : it rose more steeply during the upturn and fell to a greater extent 8 / 15 during the recession. in my view we can conclude that, to ensure greater stability in the property market, we need rigorous, prudent and, thus, less volatile appraisals. naturally, the importance of the appraisal value was at its greatest when it justified, to a large extent, the granting of credit. this is another basic and, therefore, essential lesson which is also reflected in the new law, in so far as it requires that the solvency assessment must not be based primarily on the value of the collateral or on the hypothesis that the value of such collateral will increase. needless to say, had the debtor ’ s solvency and ability to pay been strictly used as the main consideration when granting credit, as proposed in the new law, this would have helped curb the runaway growth of credit before the crisis. at this point, it is worth asking where we currently stand in terms of ability to pay. we can see in the left - hand chart that, having peaked in 2007, the ratio between the price of housing and the median household income declined until 2012 and subsequently rose again after 2014. however, if we consider the red line, which represents the affordability of housing, we see that the instalments payable in the first year are currently slightly above 30 % of monthly household income, in contrast to the level of over 50 % reached in 2008. admittedly, we need to treat these affordability data with