Bank of Greece to set mortgage caps

The Bank of Greece, in cooperation with lenders, intends to set limits on mortgage amounts in relation to the commercial value of the property and the monthly instalment to be paid by new borrowers.

The limits will be more flexible for first-time buyers – those taking out a mortgage for the first time to buy a property – with the aim of making it easier for them to buy a property on credit.

According to Ekathimerini’s sources, the new limits for the housing market concern the amount of the loan that can be obtained, which cannot exceed 80% of the commercial value of the property, or 90% if it is a new buyer; and the instalments of the loan cannot exceed 40% of the disposable income, or 50% if it is a new buyer.

According to bank sources, the proposed measures will allow 10% of the total number of loans to be approved each year to exceed the above limits, provided that this is justified by the profile and financial situation of the prospective borrower.

The setting of limits on bank lending to the housing market is a measure used in most European countries and is expected to be introduced for the first time in this country.

Limiting the amount of the loan in relation to the value of the property will act as a buffer against a fall in commercial property prices that would jeopardise these loans, while the limit in relation to the average household’s cost of meeting housing needs will prevent over-borrowing.

The new limits will be “imposed” by a Bank of Greece decision to be issued in mid-March, and will be implemented from the beginning of 2025 to allow for the necessary adjustment by banks.

The measure will not overturn the lending policies of banks, which already apply similar rules to new loans they grant. According to disbursement data for 2023, 94% of the loans granted were for less than 80% of the value of the property.

Original Story: Ekathimerini |Author: Evgenia Tzortzi
Edition: Prime Yield