4 Outlook for the supervisory regime The first thing we should note is that the long-established legal framework has remained very largely the same despite the changes the sector has undergone. Much of this is due to the prevailing regulatory approach in Germany and Europe as a whole.
First, before the crisis (from 2002 until 2008), there were income tax incentives for individuals taking housing loans. As a result, mortgage interest rates were effectively reduced by a third. Looking back, now we can say that those incentives were probably one of the factors, which escalated irresponsible borrowers’ behavior before the crisis, especially since it was not stopped early enough.