The Czech National Bank has softened its recommendations for new mortgages


The coronavirus pandemic negatively affected the economies of most states. The Czech Republic was not an exception. In such a difficult time, the guidance of the Czech National Bank considered, that the existing criteria for obtaining a mortgage are too strict.

   The new requirements will take action from April 2020 and will allow commercial banks to issue mortgages to a greater number of interested clients.The down payment requirement will be reduced from the existing 20 % to 10 %.Another requirement of the relation of the total net income to the monthly mortgagepayment will be increased from the existing 45 % to 50 %.The correlation of the debt to the total net income will no longer be taken into account when issuing a mortgage.

   The head of the Czech National Bank announced, that in the previous years, the CNB had slightly tightened mortgage lending standards. It was based on the optimistic expectations about the development of the economy.However, in his opinion, the current requirements are too strict. That is why the new solution will be beneficial not only for the economy, but also for those, who want to get a mortgage. It is also worth noting, that the previous- stricter standards willbe applicable to those, who take out a mortgage in order to buy an apartment for subsequent rent. In practice, banks will be able to find out this case only if the future income from rent is included in total net income for credit assessment purposes.

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