site.btaReal Estate Expert Comments Central Bank's New Measures Concerning Mortgage Loans

The Bulgarian National Bank's (BNB) new measures on mortgage lending will delay the dreams of owning their own home mainly for people with low incomes, but overall they are not expected to have a significant impact on the real estate market and lending in Bulgaria, Alexander Bochev of the National Real Estate Association (NREA) said in an interview with BTA. Last week, the BNB Governing Council adopted the new measures, which come into force on October 1, stipulating that the ratio between the amount of the loan and the value of the collateral at disbursement should be no higher than 85%; The ratio between the current debt service amount and the monthly disposable income of the debtor at origination (DSTI-O) shall not exceed 50%; the maximum term of the loan agreement should not exceed 30 years.

"The BNB is adopting these new rules to cool the real estate market, worries about household indebtedness, but we are currently quite far from this situation, Bochev NSSI said. According to him, about 7-8% of households in Bulgaria use mortgage loans, while most prefer consumer loans of much smaller amounts.

Limiting the repayment term of mortgage loans to 30 years will not have much impact on the real estate market, according to the expert, because in 2023 only about 6-7% of mortgage loans had a term of more than 30 years. Such loans are most often taken out by young people, who rather want to pay a smaller installment at the beginning, but in most cases they repay their debts to the bank early, because most of them are well paid professional and their salaries allow this, said Bochev.

Regarding the limitation of the financing to 85% , he said he believes that this measure will also not have a significant impact on the market, because also about 6% or 7% were mortgage loans that are over 90% for 2023.

About the measure, which stipulates that the debt-to-income ratio should not be more than 50 per cent, Alexander Bochev pointed out that currently, depending on the banks' risk-taking attitude, this ratio is 40-45-50 per cent, but in some banks it reaches 60 per cent. According to him, the latter is not so healthy and in this sense this measure will rather affect lending. The expert noted that for 2023, about 23-24 per cent of mortgage loans are above 50 per cent ratio. He, however, reminded that there are a number of extraneous factors that banks take into account when determining the mortgage loan installment, with the profile of the customer and their ability to pay being of great importance.