Leading business daily: Mortgages likely to become less accessible

According to the news site ihned.cz, the Czech National Bank is about to tighten lending policies on mortgages. According to the news site, a number of Czech banks confirmed that they expect new regulations from the central bank next week, which would lower the ceiling on mortgages available depending on income.

Photo: Filip Jandourek

Buying a house or flat is about to become that much harder. In addition to record high prices of real estate, it appears that the central bank is ready to get tougher on people asking for a mortgage.

Filip Hrubý from Česká Spořitelna told ihned.cz he expected that the new regulation would hit one in three people asking for a mortgage. It is expected that one repayment would not be allowed to cross forty percent of the client’s monthly income.

For instance, while under the present regulation, a client making 23 thousand crowns a month could get a mortgage of up to 3 million, to be repaid over a 25 year period, under the new regulation they would only get just over two million.

The news site says this new regulation would hit 20 to 30 percent of clients, primarily people in the regions, where the average salary is lower than in Prague or Brno. Earlier this month, Czech National Bank governor Jiří Rusnok told the news site idnes.cz that the price of flats in the Czech Republic was overinflated by around 15 percent and said he would address the issue in more detail on June 12th. The governor said the central bank was keeping a close eye on prices on the housing market since mortgages make up around 60 percent of all loans granted to households.

The bank first started tightening its lending policies on mortgages in the autumn of 2016 when the number of mortgages granted reached a record high. Last April the central bank issued a regulation saying mortgages should not exceed 90 percent of property values and that no more than 15 percent of customers should be given loans worth more than 80 percent of a property's value.

In the last few months the number of people asking for a mortgage has dropped, but not dramatically and there are concerns that if the economy slows down lower income clients could face serious problems repaying their loans.