Mortgage boom at its peak

Mortgage boom at its peak

the Czech National Bank (the CNB) issued financial stability report on 14.6.2016

One of the most important recommendations is compliance with the limits for LTV ( Loan to Value = loan amount to the value of the collateral) in new loans secured by residential real estate. Until now it was the intention to control sessions in the range 90% to 100%.

- The current maximum LTV of 100% will be reduced from 1. 10. 2016 to 95% and from 1. 4. 2017 to 90%.

- CNB institutions and banks advised to using all information identifying whether a loan used to finance home ownership or to purchase property as an investment (rental)

- According to statistics, the market share of mortgages on real estate investment at 25%. Putting this recommendation into practice would certainly stop some of the demand for real estate especially in larger cities.

Impact we can expect:

-  Loans over 90% LTV will not possible anymore from April 2017 (90% max.)

- The interest rates will be higher in the level of Loan To Value 80 - 90%

- The special type of mortgage " loans without prove of income " will not providing in the Czech Republic since 2017. Most of mortgage banks stopped providing the mortgages without prove of incomes.

- Another recommendation CNB - max. Maturity should not exceed 30 years for mortgages and 8 years for unsecured consumer credit to a mortgage - 8 years rule does not apply to building loans

Ondřej Marek