The BaFin, Germany`s Federal Agency for Financial Services Supervision, has recently been given two new tools to restrict mortgage lending, in case residential property markets should, against expectation, start overheating.
In this regard, the BaFin is now able to set ceilings for loan-to-value (LTV) ratios, as well as specifying the payback period, i.e. how long borrowers have to repay their loans. The relevant regulations, also called “Finanzaufsichtsrechteergänzungsgesetz“, have just been passed by German parliament.
Originally, the legislation`s original draft intended four new control instruments for the BaFin. However, the two additional proposals for debt-servicing and loan-to-come limits were abandoned by the government after strong protests from industry associations.
In addition, the German parliament has also restricted its implementation of the recently introduced mortgage lending directive of the European Union. From now on, banks will once again be allowed to include increases in real estate values as a result of construction and modernisation measures when assessing a borrower`s creditworthiness.
Your Accord Estates GmbH Team