On Wednesday, the Banking Council of the Czech National Bank (ČNB) eased the rules for granting mortgages. From January, banks will no longer have to apply the limit of the maximum amount of the applicant’s total debt to his annual income (DTI). The maximum ratio of the amount of the mortgage loan to the value of the mortgaged property remains in force. This was announced by Karina Kubelková, a member of the banking board.
The limit of the applicant’s total debt, expressed in multiples of his net annual income, has so far been 8.5, for applicants under the age of 36 9.5. The CNB decided to cancel it due to the fact that higher interest rates limit the risks related to the income level of applicants. The central bank can therefore leave the management of these risks directly to the mortgage providers.
Already in July, the CNB stopped requiring the application of the debt repayment limit to the net monthly income (DSTI). Thus, only the LTV limit remains in force, which will continue to be 80 percent, for applicants under 36 90 percent.
“In an environment of significant macro-financial uncertainties, there remains the risk of a significant drop in real estate prices, which requires the LTV indicator to continue to operate. Higher interest rates and subdued mortgage activity significantly limit the risks related to the income level of applicants, and we leave the management of these risks fully to the providers,” said Kubelková.
According to the CNB, the overvaluation of apartments has also started to decrease, but for households with median incomes, they still remain overvalued by about 60 percent. According to the central bank, households that take out a mortgage loan for their own housing may continue to face an increased risk of default. Less than ten percent of households have enough income to safely finance an average apartment at current interest rates.
2023-11-29 14:49:26
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