CNB relaxes credit ratio limits for new mortgages

  • With effect from 1 April 2020, the CNB Bank Board has relaxed its recommendation for the assessment of new mortgages.
  • The limit on the LTV ratio (the size of the loan relative to the value of the pledged property) has been increased to 90% (from 80%). 
  • The changes to the LTV ratio do not apply to "investment" mortgages.
  • The limit on the DSTI ratio (total debt service relative to net monthly income) has been increased to 50% (from 45%).
  • The current limit on the DTI ratio (debt relative to net income) has been cancelled.

With immediate effect, the CNB Bank Board has today relaxed the limits on three credit ratios used in assessing applications for new mortgages. 

The LTV limit on new mortgage loans has been relaxed from 80% to 90%, and providers may apply a 5% exemption to mortgages with higher LTVs. The previous option to provide a maximum of 15% of the total volume of mortgages with an LTV between 80% and 90% has thus been abolished. The changes to the LTV ratio do not apply to "investment" mortgages. 

The recommended limit on the DSTI ratio, which expresses what proportion of an applicant's net monthly income is spent on total debt repayments, has been increased from 45% to 50%. At the same time, the Bank Board decided to omit from the CNB recommendation to banks the duty to assess new mortgages according to the DTI ratio, which reflects the number of the household's annual net incomes needed to repay all its debts. From now on, credit institutions will only monitor this indicator. 

"In the past we reacted to relaxed credit standards and overly optimistic expectations by tightening the mortgage ratios. Now, in a situation where the economy has been hit by the coronavirus pandemic, the credit standards set in this way may become excessively tight. That is why we made today's decision," said Governor Jiří Rusnok. 

In addition, the Bank Board decided today to postpone the discussion of Financial Stability Report 2019/2020 by one month to 18 June 2020. This is to gain more time to better quantify the impacts of the coronavirus pandemic on the domestic financial sector. Financial Stability Report 2019/2020 will be published on 8 July 2020.

The exact wording of the changes is available in a new version of the CNB recommendation on the CNB website.  

Petra Vodstrčilová
CNB spokesperson