Slovakia's central bank introduces stricter rules for loan takers

The aim is to fight the high indebtedness of households.

Illustrative stock photoIllustrative stock photo (Source: SME)

The National Bank of Slovakia (NBS), the country's central bank, continues to regulate the loan market in Slovakia in order to stop the rising indebtedness of Slovaks. While the first measures were introduced last year, the new ones were put in place on July 1.

This includes another decrease in the volume of mortgages that equal 80-90 percent of the real value of the property. While the limit was set to 25 percent in January 1, 2019, after July 1 it dropped by a further 5 percent.

Read also:Slovak households fall into debt fastest in the EU Read more 

“We are coming to the target point when banks will be allowed to provide, in their overall mortgage business, only 20 percent of loans within the 80-90 percent loan-to-value range,” analyst Michal Kamenický of the Finvia Group company said, as quoted by the TASR newswire.

Moreover, banks will have to take into consideration a client's net annual income, the so-called debt to income criterion (DTI). This means the client will not get a mortgage higher than eight times their net income.

Only 5 percent of mortgage loans can exceed this value, the TASR newswire reported.

NBS measures change behaviour of Slovaks

In 2017, banks in Slovakia approved so many loans that their total number equaled 38 percent of the GDP, which also implied a high indebtedness of Slovaks.

In an effort to reverse this trend, the NBS introduced several measures in 2018 to prevent Slovaks from obtaining low-interest-rate credit. However, these measures did not make much of a difference.

Read also:Slovaks’ debts increase the most in the EU Read more 

“The share of new credit did not stop growing dramatically,” said Kamenický, as quoted by TASR.

However, analyst Radovan Slobodník of the Prvá Stavebná Sporiteľna, a company providing house construction savings, said that clients are becoming more interested in saving money due to the measures of the NBS, as reported by TASR.

Get daily Slovak news directly to your inbox

Top stories

People with negative tests can go to hairdresser or outdoor terraces

Those with a negative test result will have to follow rules introduced on October 15.

Companies fear drop in demand for their products and services the most

International chambers of commerce asked companies about their current situation as well as expectations.

Companies implemented anti-coronavirus measures.

News digest: The Gale targets corruption, cabinet officially prolongs curfew

Slovakia learned about biggest corporate taxpayers, the president signed laws changing the minimum wage and 13th pensions. Read the latest news overview.

Mobile testing units were built in the Hviezdoslavovo Square in Bratislava.

The big testing: When and where to show up, and what if I don't want to? (FAQ)

Here is what we know about the practicalities of the nationwide testing so far. Testing also applies to foreigners and diplomats in Slovakia.

Pilot testing in Bardejov