Tuesday, November 22, 2022

Austrian central financial institution defends obligatory mortgage-lending requirements

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VIENNA, Nov 22 (Reuters) – Austria ought to maintain its just lately launched obligatory requirements for mortgage lending, the Austrian Nationwide Financial institution (ONB) stated on Tuesday, regardless of a current name by the conservative finance minister for these requirements to be reviewed.

Confronted with a sustained housing growth and banks’ widespread flouting of suggestions on mortgage lending aimed toward limiting threat, Austria launched the obligatory requirements in August, although banks are nonetheless allowed to deviate from them in as much as 20% of circumstances.

They embody capping loan-to-value ratios at 90%, limiting maturities to 35 years and imposing a most debt service ratio of 40%. With rates of interest now rising, nonetheless, Finance Minister Magnus Brunner has requested that the choice to introduce the obligatory requirements be reviewed to make lending simpler.

“The newly adopted regulation contributes to safeguarding monetary stability by curbing extreme developments in residential actual property lending,” the ONB stated in a press release on its semi-annual Monetary Stability Report, referring to the binding requirements.

The regulation introducing these requirements was issued by the Monetary Market Authority (FMA), although the requirements had been developed by the Monetary Market Stability Board, which brings collectively officers from the Finance Ministry, ONB and FMA.

Banking supervision is shared between the FMA and ONB – the FMA is accountable for banking supervision correct whereas the ONB is accountable for monetary stability as an entire and for the “fact-finding” component of banking supervision.

“Now that rates of interest and the price of dwelling are rising quickly and actual property costs are very excessive, this (safeguarding monetary stability) is especially necessary, not just for causes of economic stability but additionally to stop households’ overindebtedness,” the ONB stated.

“It’s due to this fact within the curiosity of each banks and debtors that reasonably priced house purchases stay fundable, whereas unsustainable family debt doesn’t function an alternative choice to reasonably priced housing.”

The annual progress fee of financial institution loans to households had slowed just lately however nonetheless stood at 4.7% in September, greater than at any level between 2008 and 2020, the ONB stated.

Reporting by Francois Murphy

Our Requirements: The Thomson Reuters Belief Ideas.

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