18/06/2018
The CNB strikes against mortgages again
The way to the mortgage is even more winding. The Czech National Bank (CNB) has come under the guise of consumer protection for further tightening of mortgages. Starting in October, two new mortgage restrictions will be introduced. Freed and young will have to make a living with their parents or rent, but it will also make them bigger.
Concerns about mortgage buyers were filled with the latest financial stability report after the CNB's Tuesday press conference. As of October 1, the CNB, in its recommendations, introduces requirements for the borrower's borrowing rate.
Debt indicators in the CNB's viewfinder
The DML will not be more than nine times its annual net income (the DTI indicator) and the monthly debt repayment will be less than 45 percent of its net monthly income (DSTI indicator).
In specific cases, the set DTI and DSTI values will be exceeded, but only five percent of the loans. Jan Frait, director of the Financial Stability Department, said the new measures are focused on new loans only and will not affect loans refinanced.
One year ago, the CNB warned that it considered a high-risk debt repayment higher than 40 percent of the net monthly income and the total amount of debt exceeding eight times the net annual income. The new limits are somewhat milder because, according to the CNB, they should not be a shock or a surprise. Implementation banks give three to four months on the basis of a commitment approved by the Budget Committee in connection with the draft law on the CNB.
The CNB warns that the biggest risks to financial stability are born in good times when both banks and their clients perceive risks as low. And at that time we are now. The Central Bank, therefore, in an effort to protect the household from the debt trap and hence the health of banks, decided to tighten mortgages.
The CNB's real estate prices are not cooling, yet it is ready to strengthen it
And real estate prices are another wrinkle at the head of the central bank. Real estate prices grew in the Czech Republic most of the year, most of the EU, by an average of 16 percent. There is also an overvaluation of the prices of apartments, which, according to the CNB estimates, reaches 15 percent.
The conditions for spiraling the spiral between real estate prices and loans for their purchase continue to remain, according to the CNB. The current limits of the LTV due to the overvaluation of real estate prices by the CNB are the limit value and the central bank is therefore prepared to tighten it if necessary.
Singles and young families in the narrow
The CNB may intervene up to one third of the applicants. "The tightening of the CNB's recommendation for mortgage lending can affect a quarter to a third of new mortgage applicants
, especially among young people who need to finance their first housing. We assume that as a result of continued tightening of conditions and rising interest rates on the part of the central bank, the popularity of mortgages with long interest rate fixations will continue to grow.
The introduction of stricter mortgage rules will make homelessness more accessible to free people and young families, not only their own, but also their tenants. Singles and young families will be left to live longer, if not for life, in a tenancy. Rental prices, until the economy and consumers get better, will grow in big cities and their surroundings much faster.
