Limits for the amount of the loan in relation to the commercial value of the property and the monthly installment to be paid by the new mortgage borrowers are established for the first time by TTE in cooperation with the banks. The limits will be more flexible for those who are new buyers, i.e. those taking out a mortgage for the first time to buy a property, with the aim of making it easier to acquire a property through access to credit. According to banking sources, the new limits for the housing market concern:

  • The amount of the loan that someone can get and which will not be able to exceed 80% of the commercial value of the property or 90% if they are a new buyer.
  • The installment of the loan, which cannot exceed 40% of disposable income or 50% if it is a new buyer.

According to sources from banks, the proposed measures are to 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 establishment of limits regarding bank lending for the housing market is a measure applied by the majority of European countries and is expected to be instituted for the first time in our country as well. Specifically, the limit regarding the amount of the loan in relation to the value of the loaned property, will act as a buffer against any decrease in the commercial prices of the properties, which would put these loans at risk, while the limit in relation to the average household’s spending on housing needs will prevent over-leveraging.

The new limits will be “imposed” by a relevant TTE decision that will be issued in mid-March and will be implemented from the beginning of 2025, in order for the banks to make the necessary adjustments. The measure will not overturn the credit policy of banks, which already apply similar rules to new loans they grant. According to disbursement data in 2023, 94% of loans given were for less than 80% of the property’s value. The mandatory observance of the limits, however, will prevent deviations in the future and will act as a preventive measure in preventing risks from financing secured by residential properties, while, as the banks explain, their establishment will coincide in time with the prospect of a reduction in interest rates.

The new limits will concern all new loans that will be approved from now on and will also apply to credit companies, which are going to be licensed after the recent change of the institutional framework by the Ministry of National Economy. The aim is to have equal conditions of competition between credit companies and banks and to have the necessary supervisory control in all new loans. An exception will be refinancing for existing non-performing loans, loans that have been adjusted and loans that have been transferred to funds, as well as loans that will be approved in the context of housing policy programs.

According to estimates from the banks, the more favorable conditions for the granting of mortgage loans to new buyers will push the mortgage market, providing a solution to the critical issue of housing that concerns thousands of households, as demonstrated by the demand for the program “Spiti my”, through requests amounting to approximately 4 billion euros.

Nevertheless, the mortgage market remained sluggish in 2023 and new disbursements did not exceed €1.3bn, of which around €250m were disbursements made through the government subsidy programme. The low demand comes despite the high level of rents, which makes a mortgage installment directly comparable to the cost of rent in many cases, and is a major concern for banks, which see mortgage balances shrinking steadily, having fallen to close to 28 billion euros. It should be noted that the mortgage market had reached its highest point in 2010 with balances of 80 billion euros and disbursements of 12 billion euros per year, but since then it has been shrinking systematically, returning to the levels of 2002!

At the level of demand, the reluctance to borrow is attributed to the rise in interest rates, but also to the rise in housing prices, which, combined with the persistence of inflation, squeezes the purchasing power of households and prevents “openings” for borrowing. It is typical that house prices have been increasing at a double-digit rate for the last two years (+11.9% per year based on September 2023 data) and are now not far from the previous high of 2008. In fact, according to estimates, there are no signs of slowing down upward trend in prices, due to the mismatch between supply and demand – which is due on the one hand to the low private construction activity for a decade and on the other hand to the increased demand mainly from abroad in the context of the “golden visa” program -, the development of short-term rentals and the attractiveness of the country as a tourist destination.