The Frankfurt-based European Systemic Risk Council (ESRB) has drawn up new rules for lending, which are now also being implemented in Austria by the National Bank and the financial market stability committee based there.
From July 1, 2022, real estate borrowers must raise at least 20 percent of their own funds, the loan term may not exceed 35 years and the monthly rate may not exceed 40 percent of net income.
If these criteria were still recommendations, the supervisors now see the time to make them mandatory. Currently, more than half of the loans granted in Austria do not fully meet these guidelines, said Deputy Governor Gottfried Haber of the National Bank recently.
The banks are skeptical about these new award criteria for residential loans. “New bureaucratic hurdles are being set up here without thinking about the real problem: there is a lack of affordable housing,” says Michaela Keplinger-Mitterlehner, head of the banking division at the Upper Austrian Chamber of Commerce.
Ulrike Weiß, head of the consumer protection department at the Upper Austrian Chamber of Labour, also sees the main problem as “that housing is too expensive”. In principle, however, it would be good if the banks were reminded with strict criteria to pay attention to the affordability of loans for customers. However, whether this goal can be achieved with rigid rules is another question. “How you finance housing is a highly individual matter.”
Herbert Walzhofer, CEO of Sparkasse Oberösterreich, sees the rigid income limit as a problem. “I think that’s socially and socio-politically questionable,” says Walzhofer. This could make it more difficult for young families in particular to acquire property. “This drives them onto the rental market, where rents are often so high that they exceed the repayment rate of a loan,” says Walzhofer.
Keplinger-Mitterlehner assumes that the regulations still have to change. “A lot of things are still unfinished at the moment. For example, it is not yet clear what counts as own funds. According to the current status, for example, the property on which the building is to be built would not be counted as own funds,” says Keplinger-Mitterlehner. The banks would have liked to be more involved in the development of the criteria.
Affordability is key
The forthcoming award guidelines for residential construction financing provide for a maximum rate of 40 percent of the household net income. But that doesn’t necessarily have anything to do with actual affordability. An example from the Sparkasse OÖ shows a significantly lower monthly installment, because the cost of living also plays an important role. For a couple with two children, the 40 percent rule would result in a loan of EUR 440,000 at a monthly rate of EUR 1,536. The Sparkasse’s calculations show that for a 90 square meter apartment at a purchase price of EUR 380,000 (including ancillary purchase costs) with a term of 30 years and a fixed interest rate of 1.5 percent for 30 years, compliance with the new criteria (20 percent Own funds) and taking into account the cost of living result in an installment of a maximum of 1100 euros.
Source: Nachrichten
