Selloff or Market Correction? Either Way, Here's What to Do NextSee Overvalued Stocks

Austrian central bank defends compulsory mortgage-lending standards

Published 11/22/2022, 04:07 AM
Updated 11/22/2022, 04:11 AM
© Reuters. FILE PHOTO: Austrian National Bank Oesterreichische National Bank (OeNB) headquarters is pictured in Vienna, Austria March 28, 2019.   REUTERS/Leonhard Foeger

VIENNA (Reuters) - Austria should keep its recently introduced compulsory standards for mortgage lending, the Austrian National Bank (ONB) said on Tuesday, despite a recent call by the conservative finance minister for those standards to be reviewed.

Faced with a sustained housing boom and banks' widespread flouting of recommendations on mortgage lending aimed at limiting risk, Austria introduced the compulsory standards in August, though banks are still allowed to deviate from them in up to 20% of cases.

They include capping loan-to-value ratios at 90%, limiting maturities to 35 years and imposing a maximum debt service ratio of 40%. With interest rates now rising, however, Finance Minister Magnus Brunner has asked that the decision to introduce the compulsory standards be reviewed to make lending easier.

"The newly adopted regulation contributes to safeguarding financial stability by curbing excessive developments in residential real estate lending," the ONB said in a statement on its semi-annual Financial Stability Report, referring to the binding standards.

The regulation introducing those standards was issued by the Financial Market Authority (FMA), though the standards were developed by the Financial Market Stability Board, which brings together officials from the Finance Ministry, ONB and FMA.

Banking supervision is shared between the FMA and ONB - the FMA is responsible for banking supervision proper while the ONB is in charge of financial stability as a whole and for the "fact-finding" element of banking supervision.

"Now that interest rates and the cost of living are rising rapidly and real estate prices are very high, this (safeguarding financial stability) is particularly important, not only for reasons of financial stability but also to prevent households' overindebtedness," the ONB said.

© Reuters. FILE PHOTO: Austrian National Bank Oesterreichische National Bank (OeNB) headquarters is pictured in Vienna, Austria March 28, 2019.   REUTERS/Leonhard Foeger

"It is therefore in the interest of both banks and borrowers that affordable home purchases remain fundable, while unsustainable household debt does not serve as an alternative to affordable housing."

The annual growth rate of bank loans to households had slowed recently but still stood at 4.7% in September, more than at any point between 2008 and 2020, the ONB said.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.