Austria decided to make mortgage standards binding to slow down the housing boom

In February, Austria announced that it would switch from widely flouted recommendations to binding standards, country made this decision at the command of the European Union’s Financial Stability Watchdog.

VIENNA: On Monday, the financial market authority informed us that from the start of august, Austria is going to make mortgage standards compulsory to manage the boom continued in its housing market.

These new standards include imposing a maximum debt service ratio of 40%, capping loan to value rations at 90% and limiting maturities to 35 years.

Statement by FMA informed “The aim of this decree is to limit the systemic risks in residential property financing in light of the property price boom, turnaround in interest rates, fragile economic environment and current lending practices.”

It also mentioned, As a result of consultations before the command was issued, its start date was postponed by a month and the minimum size of loan covered was raised to 50,000 euros ($52,695) from 40,000.

Financial Market Stability Board announced these standards months ago, to make these standards compulsory as soon as possible, ONB (Austrian National Bank)  was called last week.

The ONB informed in the report the previous week that put the year-on-year increase at 12.3% in the first quarter of the current year, after 12.6% in the fourth quarter as Austrian residential property prices have continued to rise sharply.

The central bank informed that the prices of residential property were 35% overvalued relative to fundamentals in the first quarter. In Vienna, it put the figure at 40%.

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