Regulator to Raise LTV Limit to 90% for 1st-time Homebuyers

The central bank and financial market regulator said home price growth in recent years had made it "increasingly difficult" for young, first-time home buyers to raise the down payment necessary to take out a mortgage and warned of possible "extensive negative second-round effects".

MNB said it would apply the differentiated 90% LTV limit, allowing a lower down payment, "in the near future".

Concurrently with the release of its 2023 Macroprudential Report, the NBH also said it would recommend mitigating, with legislation, high costs, and administrative burdens, in international comparison, related to early repayment and borrowing. It acknowledged that home loans with rates fixed for long periods had become the norm in recent years thanks to central bank measures, but said that in the current interest rate environment, borrowers could be stuck with high-interest rates for a long time due to low refinancing activity.

MNB said the liquidity and funding position of the banking system remained "adequate" as lenders met the liquidity coverage ratio requirement "with safe buffers", adding that "no significant changes" were apparent compared to recent years.

Higher client deposit rates "may represent a funding risk in the longer term", MNB said, although noting that pass-through to deposit rates in the high-interest rate environment had been "limited" and "lagging".