The Austrian Financial Market Authority (FMA) has issued a Regulation for limiting of systemic risk in debt-based financing of residential real estate at credit institutions (KIM-V; Kreditinstitute-Immobilienfinanzierungsmaßnahmen-Verordnung), which has entered into force following its publication in the Federal Law Gazette (Bundesgesetzblatt). The FMA has implemented the Financial Market Stability Board’s (FMSG; Finanzmarktstabilitätsgremium) recommendations and guidance in issuing this Regulation. The Regulation applies in a legally binding manner from 1 August 2022 on newly concluded financing arrangements for private residential real estate.
“This Regulation’s objective is to contain the increasing systemic risks from residential real estate financing in relation to the boom in real estate prices, the changing interest rates regime, the fragile economic environment, as well as current lending practices,” remarked the FMA Executive Directors, Helmut Ettl and Eduard Müller: “When granting a loan, it is essential that the borrower’s ability to repay the loan is the primary consideration, rather than the mortgage collateralisation of the loan.”
Key points of the news standards on lending
In accordance with the FMSG’s recommendations and building upon the Oesterreichische Nationalbank’s (OeNB) expert opinion, the FMA imposes the following upper limits in connection with the granting of financing for residential real estate:
- A maximum loan-to-value ratio of 90%, with a 20% exception quota being granted to credit institutions.
- A debt service-to-income ratio of a maximum of 40% (10% exception quota).
- A maximum term of 35 years (5% exception quota).
- However, a maximum of 20% of all loans in total shall be allowed to exceed these limits.
- In order to simplify renovations and redevelopments – in particular the transitioning from fossil energy sources towards renewable energy – financing below a € 50,000 de minimis threshold is excluded from these rules.
As a result of the suggestions and intensive discussions during the consultation process, the date of entry into force of the Regulation was postponed by a month to 01 August 2022, and the de minimis threshold was increased from € 40,000 to € 50,000.
The Regulation can be found online on the FMA website (currently in German only) as well as in the Legal Information System of the Republic of Austria (RIS; Rechtsinformationssystem des Bundes.
Journalists may address further enquiries to:
Klaus Grubelnik (FMA Media Spokesperson):
+43 (0)676 88249516
+43 (0)1 249 59 – 6006