The Bank of Greece (BoG) issued a press release informing the public it would be enacting a series of measures linked to loans and other credit for individuals secured by residential real estate.
The measures are aimed at preventing or mitigating systemic risks stemming from the real estate market in Greece and are associated with households and/or businesses lending secured by residential or commercial real estate.
The press release reads as follows:
The Bank of Greece enacted macroprudential measures for loans and other credit to natural persons secured by residential real estate
- The Bank of Greece enacted macroprudential borrower-based measures for loans and other credit to natural persons secured by residential real estate located in Greece.
- These measures are binding and take the form of caps on the debt-service-to-income at origination (DSTI-O) ratio and the loan-to-value at origination (LTV-O) ratio.
- The measures will become applicable on 1 January 2025.
The Bank of Greece enacted macroprudential borrower-based measures (BBMs) for loans and other credit to natural persons secured by residential real estate (RRE) located in Greece by Executive Committee Act 227/1/08.03.2024 (Government Gazette B 1716, 15.03.2024).
These measures comprise:
- a cap on the debt service-to-income ratio at origination (DSTI-O ratio) of 50% for first-time buyers and 40% for second and subsequent buyers, and
- a cap on the loan-to-value ratio at origination (LTV-O ratio) of 90% for first-time buyers and 80% for second and subsequent buyers.
The abovementioned BBMs shall not apply to non-performing loans and forborne loans (within the meaning of Articles 47a and 47b, respectively, of Regulation (EU) No 575/2013 of the European Parliament and the Council), to loans and other credit disbursed under national housing policy or green transition programmes subject to specific terms and conditions (such as the “My Home” loan programme), as well as portfolios of re-performing loans purchased by credit institutions from NPL servicers licensed under Law 5072/2023.
Credit providers are allowed to exempt 10% of the total number of new loans approved and at least partially disbursed in each quarter from each of the abovementioned caps.
The power to introduce BBMs is conferred upon the Bank of Greece by means of Article 133A of Law 4261/2014.
Related information:
- Macroprudential borrower-based measures: these measures mainly consist of caps on ratios relating to credit provision, borrowers or individual credit features. They are aimed at preventing or mitigating systemic risks stemming from the real estate market in Greece and are associated with lending to households and/or businesses secured by residential or commercial real estate. BBMs also help prevent excessive loosening of credit standards and strengthen the resilience of the financial system. These measures are complementary to other macroprudential measures used to address cyclical and structural systemic risks such as the Other Systemically Important Institutions buffer (O-SII buffer).
- Debt service-to-income at origination (DSTI-O) ratio: the annual debt servicing costs of the total debt of the borrower divided by the borrower’s total annual disposable income at the time of loan/credit origination.
- Loan-to-value at origination (LTV-O) ratio: the total amount of the loan or loan tranches secured by real estate property at the time of origination divided by the value of the real estate collateral at the time of origination.
- First-time buyer: a borrower who has not been granted a loan or credit secured by residential real estate in the past.
More information on macroprudential policy can be found here.
