Banks urge regulators to adjust mortgage caps

02 Dec 2022

Banks in Austria are asking regulators to reconsider mortgage limits aimed at cooling down the overheated property market four months after coming into force.

The measures are leading to unnecessary obstacles for home buyers, according to banks, and have led to a 40% decline in newly issued household mortgages, Bloomberg reports. 

Policymakers throughout Europe are attempting to circumnavigate a property market suffering from soaring interest rates and inflation. This latest statement by the Austrian Economic Chambers’ banking division follows a similar proposal unveiled by Finance Minister Magnus Brunner in October.

The rules in Austria limit the size of mortgages in relation to property value, term length and monthly instalments, and banks are permitted a quota for loans that do not meet certain criteria. 

“The regulation, in its current form, only amplifies the crisis,” according to Willi Cernko, head of the banking division and chief executive officer of Erste Group Bank AG. “We all have an interest in stable financial markets, but also to allow people to buy a home.” 

Financial stability regulations in the country are established by a committee of national bank delegates, the financial regulator, the finance ministry and the fiscal council. 

Over the last 10 years, house prices have doubled in Austria, registering double-digit annual growth rates over the past eight quarters, the Bloomberg report goes on to add. 

Last month, Vice Governor of the Austrian National Bank, Gottfried Haber, said a review would be appropriate after the latest lending data can be assessed in Q1 2023. 

Increasing interest rates and inflation were mainly responsible for the housing market cooldown, Haber said at the time, more so than from the mortgage regulations. 

The banks’ proposals include relaxing limits for first-time buyers who may have greater means to repay loans.