Czech central bank moves to ease some mortgage rules (updated)

Moneta Money Bank, A.s

29/11/2023 15:29

(Adds quotes in paragraphs 6, 11, details on DTI, CCB)
       PRAGUE, Nov 29 (Reuters) - The Czech National Bank
maintained the countercyclical capital buffer (CCB) rate for
banks at 2.00% after two consecutive cuts, it said on Wednesday,
while also deactivating the upper limit of its debt-to-income
(DTI) ratio for mortgage lending.
    The bank will maintain the upper limits on loan-to-value
(LTV) ratios for lending at 80% and 90%, it said following a
board meeting on financial stability issues.
    "In an environment of significant macro-financial
uncertainties, the risk of a major decline in property prices
persists, necessitating continued application of the LTV ratio,"
bank board member Karina Kubelkova said in a statement.
    The central bank tightened mortgage lending two years ago
when fast-rising home prices and low interest rates were leading
a mortgage loan boom. 
    But interest rates have risen sharply in an inflation surge
since then, hitting bank lending as home ownership becomes more
unattainable in large cities.
    "Higher interest rates and subdued mortgage lending are
significantly limiting the risks associated with applicants’
income levels, and we are leaving it entirely up to lenders to
manage those risks," Kubelkova said.
    Banks should not provide loans exceeding 80% of the property
value, or 90% for younger borrowers, under existing measures.
    The requirement for a loan applicant's debt to annual income
(DTI) to not exceed 8.5 times will be deactivated from Jan. 1.
    The bank, as part of its twice-yearly meeting on financial
stability, said stress tests demonstrated the Czech financial
sector remained resilient to adverse economic developments.
    The banking sector as a whole would comply with regulatory
capital requirements in both baseline and adverse scenarios, it
said.
    "However, the Adverse Scenario would have an appreciable
impact on banks’ capitalisation. A marked increase in credit
defaults and a sharp deterioration in profitability would lead
to the release of the countercyclical capital buffer," it said.
    The bank has cut the CCB rate, meant to build resilience in
banking in times of high lending, twice this year, lowering it
from 2.50%.
    The bank said it would gradually lower the buffer rate if
cyclical risks continued to disappear.

 (Reporting by Jason Hovet and Jan Lopatka, Editing by William
Maclean)
 ((jason.hovet@thomsonreuters.com;))