- Hans Weber
- December 8, 2022
The ČNB has not changed the limits for mortgage lending
The Czech National Bank kept the mortgage loan amount to the value of the mortgaged property (LTV) at 80 percent. At the same time, it left unchanged two other limits for mortgage lending.
The ČNB tightened mortgage lending limits last November, effective from April 1st this year. It reduced the mortgage loan amount to the value of the mortgaged property (LTV) from 90 percent to 80 percent. The 90 percent limit is applicable for applicants below the age of 36. It has also reinstated other income limits for mortgage lending.
The DTI limit, an applicant’s total debt expressed in multiples of their net annual income, is 8.5 from April. For young people under 36, it is 9.5. The DSTI limit, which is the ratio between a loan applicant’s total monthly debt repayments and their net monthly income, is 45 percent. For young people under 36, it is currently 50 percent.
The ČNB also noted that property prices at the end of 2021 were about 40 percent higher than what would be consistent with the median household income level and the required rental income from the property.
In addition, the Board also left unchanged the so-called countercyclical capital buffer rate to protect the credit market. The rate is currently 0.5 percent, but in line with the Board’s earlier decisions, it will gradually rise to 2.5 percent from April 2023.
According to the ČNB stress tests, the financial sector in the Czech Republic remains highly resilient to economic downturns. Banks are sufficiently capital-equipped to absorb shocks even during prolonged economic difficulties, ČNB officials said.