The Bank of Greece (BoG) announced its decision to impose a ceiling on new mortgages in an effort to prevent excessive lending.
According to the new rules that will apply from January 1, 2025, the loan cannot exceed 80% of the commercial value of the property.
However, the percentage rises to 90% for those take a mortgage for the first time.
Moreover, the cost of servicing a borrower’s loan obligations cannot exceed 40% of their annual income, with the exception of young buyers, for whom the limit rises to 50%.
BoG press release
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.
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