CNB recommends stricter limits for investment mortgages. Capital buffers remain unchanged
The Czech financial sector is stable and resilient, according to the conclusions of the Czech National Bank (CNB) Bank Board’s financial stability meeting today. In particular, the Bank Board assessed domestic risks related to mortgage lending and the phase of the financial cycle at the meeting. The CNB is reacting to the risks associated with the provision of investment mortgages by recommending that lenders apply a more cautious LTV (70%) and DTI (7) with effect from 1 April 2026.
The Czech economy is still in the growth phase of the financial cycle. “Activity on the mortgage lending market has exceeded long-term averages, residential property prices are increasing at double-digit rates and the share of investment mortgages for the purchase of residential property is also rising. At the same time, these loans show riskier characteristics than loans for the purchase of owner-occupied housing,” said CNB Bank Board member Jakub Seidler following the financial stability meeting today.
The Bank Board has therefore issued a recommendation that lenders apply an LTV limit of 70% and a DTI limit of 7 to these loans for the purchase of investment residential property. “The recommendation applies to a relatively small part of the mortgage market and is aimed at preventively mitigating some emerging risks at their initial stage. This step also reduces the potential for further accumulation of systemic risks, to which it would be necessary to respond by reintroducing DTI and DSTI limits,” added Jakub Seidler.
As regards loans for the purchase of owner-occupied housing, the Bank Board decided to keep the LTV limit at 80% (or 90% for applicants under 36 years). The current settings take into account the risks of apartment price overvaluation and rapid growth in mortgage lending, while effectively mitigating potential systemic risks connected with a decrease in the value of property pledged as collateral. The DTI and DSTI ratios remain deactivated, as banks are not easing credit standards for mortgage loans across the board for the time being, and the related systemic risks are not increasing.
The Bank Board also evaluated the resilience of the banking sector. Taking into account the cyclical risks stemming from current and expected domestic and global economic developments, it decided to leave the countercyclical capital buffer rate at 1.25%. “The level of cyclical risks in the banking sector’s balance sheet rose slightly, but this was in line with our expectations. Our decision reflects the fact that the current buffer rate for banks continues to cover the elevated risks sufficiently,” added Jakub Seidler.
The banking sector is well capitalised. As a whole, it passed the CNB’s demanding stress test using a hypothetical scenario of a deep and long-lasting economic downturn. “The results of the test have shown that domestic banks would withstand even large credit losses thanks to their robust profitability. The volume and quality of the banking sector’s assets, coupled with its initial amount of capital, create favourable conditions for absorbing the shocks considered in the stress test,” said Libor Holub, Executive Director of the CNB’s Financial Stability and Resolution Department.
In its Financial Stability Report, the CNB regularly assesses the soundness of the financial sector and its resilience to adverse shocks. The report forms the foundation for configuring macroprudential policy tools, in particular bank capital buffers and borrower-based measures. The CNB will publish the latest Financial Stability Report – Autumn 2025 on 15 December 2025. The minutes of today’s Bank Board meeting on financial stability issues, including the votes cast by the individual Bank Board members on macroprudential policy measures and also attributed arguments, will be published the same day.
Jakub Holas
Director, Communications Division
Capital instruments
Borrower-based measures (LTV, DTI and DSTI limits)
Notes for journalists:
An investment mortgage is a mortgage loan provided for the acquisition of a third or subsequent residential property and/or a buy-to-let residential property.
Financial stability has been a key objective of the Czech National Bank alongside price stability since 2013. Maintaining financial stability is defined in Act No 6/1993 Coll., on the Czech National Bank. The Act requires the CNB to set macroprudential policy by identifying, monitoring and assessing risks jeopardising the stability of the financial system and, in order to prevent or mitigate these risks, to contribute by means of its powers to the resilience of the financial system and the maintenance of financial stability. Since the second half of 2021, the CNB has had the statutory power to set upper limits on the LTV, DTI and DSTI ratios (borrower-based measures). Compliance with the limits must be legally binding in order to ensure a level playing field on the market.
The Bank Board discusses financial stability issues twice a year – in the spring and in the autumn. The aim of the Financial Stability Report is to identify the risks to the financial stability of the Czech Republic in the near future on the basis of previous and expected developments in the real economy and the financial system.
Countercyclical capital buffer (CCyB) – This instrument is aimed at increasing the resilience of the banking sector to risks associated with fluctuations in lending activity. The CCyB should enable banks to lend to households and firms even at a time of recession or financial instability.
LTV (loan-to-value) – the ratio of the value of a mortgage loan to the value of collateral.
DTI (debt-to-income) – the ratio of the applicant’s total debt to their net annual income.
DSTI (debt-service-to-income) – the ratio of the sum of an applicant’s monthly repayments to their net monthly income.