BUSINESS: The Austrian central bank is concerned about rising mortgage risks amid the property boom

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Economy8 hours ago (Nov 24, 2021 04: 15AM ET)

(c) Reuters. FILE PHOTO: A site fence is placed in front of the Austrian National Bank (OeNB) building in Vienna, Austria, June 15, 2018. REUTERS/Heinz-Peter Bader

VIENNA – The central bank stated Wednesday that the risks from excessively cautious mortgage lending are rising amid Austria’s boom in housing markets. It stressed that such loans require close scrutiny.

In its June semi-annual Financial Stability Report, the Austrian National Bank said that closer scrutiny was needed to prevent systemic risks. Officials at ONB said that they will wait and see.

In a statement released Wednesday on the latest report, the ONB stated that the housing market is still growing faster than the euro area. The Financial Market Stability Board which comprises representatives from the Finance Ministry, the central bank, and the Financial Market Authority, found that mortgages are still more risky than those recommended by them.

“In the Austrian residential property market … price and loan growth rates have remained vivid (in the first half of 2021), which puts banks’ compliance with sustainable lending standards under increased supervisory scrutiny,” the ONB said.

Particular attention should be given to sustainability in lending, particularly real estate lending. It is important to follow the FMSB’s guidelines. “

The FMSB’s recommendations for sustainable mortgage lending are a downpayment of at least 20% of total financing needs, a maximum loan maturity of 35 years and a debt service-to-income ratio of no more than 30% to 40% of household net income.

The ONB stated in its headline that housing loan risks are “on the rise”.

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