New mortgage conditions in the Czech Republic will take effect in October
As Vinegret.cz notes, from now on the maximum mortgage amount must not exceed nine times the borrower's annual salary. This means that with a net salary of 25,000 crowns per month, a client can ask the bank for no more than 2,700,000 crowns.
The second important change concerns the monthly payment on the mortgage and other loans (if any). The total amount of payments must not exceed 45% of the borrower's income.
The regulation takes the form of a recommendation, since there is no law in the Czech Republic that obliges banks to obey the central bank in lending matters. However, almost all banks heed the regulator's recommendations.
The ČNB decided to tighten the rules amid a rapid rise in real estate prices. Last year, it was the most intense in the European Union. Despite the successes of the Czech economy, the salaries of most residents are not keeping up with housing prices. In the event of a worsening economic situation, mortgage payments could become unaffordable for many clients, leading to another crisis in the banking system.