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A person from Vorarlberg whose loan application to buy an apartment was rejected turned to the Constitutional Court. “However, the FMA issued the regulation in accordance with the procedure provided for in the Banking Act (BWG),” the Constitutional Court said in a statement on Wednesday.
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The impeded real estate borrower submitted to the Constitutional Court that the Financial Market Authority (FMA) Credit Institutions Real Estate Financing Measures Ordinance (KIM Ordinance) was illegal because there were no systemic risks from debt financing of real estate with possible negative effects on financial market stability. This means that a requirement for a regulation stated in the Banking Act is not met.
These rules have been in effect since mid-2022
Since the lending standards were tightened in mid-2022, housing loans for private individuals are no longer allowed to run for longer than 35 years, the equity share must be at least 20 percent, and the repayment rate may not exceed 40 percent of the available net income. In February 2023, the regulations for interim financing were relaxed slightly.
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In its statement on the stricter real estate credit rules, the Constitutional Court recalled that the FMA was obliged to examine the measures in the future to see whether they were still necessary and, if necessary, to adapt or repeal them. The banks and the real estate industry have been pushing for a relaxation of real estate credit rules for a long time. Real estate lending has been declining sharply since mid-2022.
Also Brunner for changes
Finance Minister Magnus Brunner (ÖVP) also wants changes to the KIM regulation. The general conditions have changed since its introduction, said Brunner recently in an APA interview. “The development of interest rates is different, the economic situation is different and the stability of the financial market is not at risk.” The financial market supervisory authority has already implemented initial relief, “but it is not yet enough”. When granting a loan, the level of income should be taken into account. The FMA is an independent authority, “but you are allowed to express an opinion,” said Brunner.
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