Austrian central financial institution defends obligatory mortgage-lending requirements By Reuters

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

Confronted with a sustained housing increase 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 instances.

They embrace 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, nevertheless, 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 an announcement 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 have 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 chargeable for banking supervision correct whereas the ONB is accountable for monetary stability as a complete and for the “fact-finding” ingredient of banking supervision.

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

“It’s subsequently within the curiosity of each banks and debtors that inexpensive house purchases stay fundable, whereas unsustainable family debt doesn’t function a substitute for inexpensive housing.”

The annual progress charge 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.