FMA is examining easing of real estate loans

Bank loans for residential real estate have become more difficult to obtain since the summer. Against the background of high inflation, rising interest rates and a gloomy economic outlook, the award criteria have been tightened since August 1st. However, there could soon be a partial relaxation of the regulations. The Financial Market Authority (FMA) is now examining the rules on short-term bridging financing and non-repayable grants. A decision will be made in early 2023.

The Financial Market Stability Committee (FMSG) asked the FMA to “develop a concept for the further development of the KIM-V (credit institutes real estate financing measures regulation, note) with regard to short-term interim financing for the acquisition of a new property in connection with the sale of an existing property and with regard to non-repayable grants by regional authorities as a basis for an FMSG decision at the beginning of 2023”, as the committee announced at its meeting today. The FMSG, the FMA and the Oesterreichische Nationalbank (OeNB) committed to an “evidence-based approach” as set out in the joint strategy.

In the months before the KIM Regulation came into force, the FMSG announced on Tuesday that there had been “extraordinarily strong credit dynamics”. In the months since August, there has been a significant decline in new lending. However, the annual growth in residential real estate loans has remained very high, it was emphasized, “both in historical and European comparison”.

The real estate industry, banks and politicians have criticized the stricter lending guidelines, which are intended to protect borrowers from over-indebtedness and the financial market from instability, and have called for adjustments, as the regulations are perceived as unfair in certain cases. According to the banking division of the Austrian Federal Economic Chamber, more than a third of the 20 percent exemption contingent of the banks is currently burdened by the form of interim financing, which is important in practice for borrowers. According to current regulations, a property that is still inhabited may not be used as security to secure a new purchase, even if it is to be sold again in the near future and the loan reduced accordingly. Banks currently have to take the full loan amount for the new property – without deducting the value of the current apartment – in their exception quota, according to the criticism from the banks. The capital repayment will be made by selling the property that is currently still inhabited.

Just recently, Finance Minister Magnus Brunner (ÖVP) also called for relief when buying a first property and suggested, for example, the elimination of the land register entry fee and the land transfer tax. According to the state governor Johanna Mikl-Leitner (also ÖVP), the state of Lower Austria is planning to assume liability and extend the term of state loans, it was announced in mid-October.

“The FMSG has now reacted to the existing problems. I am confident and I assume that the FMA will implement improvements in lending as soon as possible,” said Brunner in a statement on Tuesday. The tightened conditions for lending meant that “many people can no longer get loans due to the KIM regulation”.

The FMSG started its work in 2014. Its task is to strengthen financial market stability. Members are representatives of the Federal Ministry of Finance, the Fiscal Council, the Financial Market Authority and the Oesterreichische Nationalbank. In particular, the FMSG can issue recommendations to the Financial Market Authority and risk warnings.