The Czech National Bank eases mortgage restrictions
It is not that long ago since the Czech National Bank introduced their regulations for these three parameters in order to slow down the market. Effective from 1.4.2020, they changed all of them in order to help people with borrowing.
What does it mean for you exactly and what are these parameters?
LTV (Loan-To-Value) - 80% > 90%:
Firstly, let us remind you what LTV stands for: it is the percentage of the loan vs it's security. For example 4 MCZK loan on 6 MCZK flat is 66% LTV.
The CNB increased the maximum LTV for the banks from 80% > 90%. Until now, banks were still able to provide 90% mortgages, but only within 15% of their total volume of all mortgages. Now there is no limitation for the banks in terms of how many 90% mortgages they can provide.
DSTI - 45% > 50%
This stands for Debt Service To Income ration, meaning how much from your average net income you can spend on monthly repayments. For example if your net income is 60.000 CZK, then it is possible to have repayments for up to 30.000 CZK according to the new 50% DSTI regulation (it was increased from 45%).
Long story short - you can borrow more money.
DTI regulation was cancelled
Now there is no upper limit on total Debt To Income (DTI), which used to be 9 times the annual net income. With the 60.000 CZK average net income until now you were able to borrow "60.000 * 12 * 9 = 6.480.000 CZK, now this regulation is completely removed, leaving only the DSTI and LTV in place.
Summary - how will this impact the mortgage market?
These days banks are tightening their rules for providing new mortgages, so the CNB came with news allowing banks more options and removing some of the recent regulations.
If you personally are considering new mortgage or refinancing, feel free to get in touch for full guidance, we are specialized working with Expats.