June 19, 2018 / 2:42 PM / 6 months ago

Czech banking group: New rules would deny mortgage to 20 pct of 2017 applicants

PRAGUE, June 19 (Reuters) - New Czech central bank restrictions on mortgages would deny access to mortgages to about 20 percent of applicants based on 2017 data, a study by the Czech Banking Association found on Tuesday.

The central bank last week announced it would recommend banks to not provide mortgages that would raise an applicant’s total debt to more than nine times annual net income with debt servicing not exceeding 45 percent of income.

The banking association said that by volume, about 30 percent of mortgage applications would miss the limits based on 2017 figures.

The central bank said the housing market was overheating, mainly due to low supply in Prague, and house prices were about 15 percent over-valued.

The new restrictions will come into effect in October and banks need to apply them to 95 percent of loans. They add to a limit of 80 percent on loan-to-value of collateral, which must apply to 85 percent of any bank’s lending book. (Reporting by Jan Lopatka, Editing by Michael Kahn)

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