Croatian National Bank regulations for housing loans take effect on July 1st

As of July 1st, new regulations from the Croatian National Bank will require stricter lending conditions for citizens. The Croatian National Bank says it is trying to slow down the growth in consumer borrowing so as to reduce the risks associated with excessive borrowing and possible problems with loan repayment.

Commenting on the new regulations, the chief economist at the Croatian National Bank, Vedran Šošić, noted that a somewhat negative trend has emerged in terms of the indebtedness of Croatian citizens: “The year’s long trend of a reduction in the indebtedness of our citizens inverted last year. At the end of last year the ratio of consumer debt to GDP grew to 41%. The second thing is that citizens are taking on debts for longer and longer periods of time, and in a race against growing housing costs, they are also tying themselves to higher and higher monthly annuities. This higher debt and higher burden on income is a recipe for some kind of negative scenario.”

For this reason, the new regulations ensure that the size of a monthly annuity for housing loans cannot exceed 45% of monthly income. According to the Croatian Banking Association, some €1.5 billion in housing loans have been approved in the first three months of this year, which is growth of more than 100% when compared to the same period last year.

It should be noted however, that banks will be able to approve up to twenty percent of their housing loans and up to ten percent of their remaining loans without adhering to the new regulations and on the basis of their own assessment of the creditworthiness of the client.

Source: HRT