Central Bank Says Austrian Mortgage Lending Needs More Scrutiny

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By Francois Murphy

VIENNA, June 7. (Reuters)Mortgage lending by Austrian banks needs more scrutiny to prevent any systemic risk stemming from lower standards during the ongoing housing boom, the country’s central bank said on Monday in a financial stability report.

Home prices in Austria in the first quarter rose 12.3% from the previous three months, the National Bank of Austria (ONB) said in a separate report released on Friday. This figure was 10% in the fourth quarter of last year and 9.5% in the previous quarter.

A semi-annual financial stability report released on Monday found that home loans were more risky than the standards recommended by the country’s Financial Market Stability Board, which includes representatives from the Treasury, Central Bank and Financial Market Authority.

“Initial payments on more than half of new loans do not reach 20% of total financing needs, and debt service exceeds 40% of borrowers’ net profit in the case of one fifth of loans,” the Austrian National Bank said. statement.

“These developments warrant closer scrutiny to prevent any potential systemic risks in early stage residential lending.”

Debt-to-household income ratios are growing at the fastest pace in 15 years as home loans “continued to grow at a rapid pace” as financing conditions remain favorable and demand for housing remains strong, the central bank said. However, the credit quality of banks has not deteriorated yet, he added.

F“Or now the central bank will watch, not take action,” Lieutenant Governor Gottfried Haber said at a press conference, adding that the coronavirus crisis has not yet ended and the overall situation has not reached a stable “steady state”.

“We do not believe there are huge and urgent risks in the residential real estate area at this time,” he said, adding that this phase will take months.

“There is … no pressure to act immediately, to correct something or to do something differently, but we must analyze the impact on the long-term stability of the financial market,” he added.

(Reporting by François Murphy; editing by Toby Chopra and Emelia Sitol-Matariz)

((francois.murphy@thomsonreuters.com))

The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.

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