(Bloomberg) -- Austria’s Financial Market Stability Board will let strict limits on home loans expire next year, arguing that the danger of overheating in the property market has now passed.
Banks and some lawmakers have long criticized the regulation for muting already weak mortgage demand by setting limits on the size of loans households can take, and capping monthly installments.
“The proportion of defaulted residential property loans has developed more favorably,” the FMSG said in a statement Monday. Together with higher bank capitalization, there are no longer serious risks to financial stability, it said.
Implemented in Aug. 2022, the rules would have needed justification to be extended beyond the middle of 2025 by the panel consisting of experts from Austria’s central bank, financial supervisor, the Fiscal Council and the Finance Ministry.
The panel said it will continue to expect banks to abide by the standards, and will assess potential alternatives, including guidelines and capital-based measures.
New home lending fell by more than a half after the introduction of binding rules in 2022, a time that coincided with rising interest rates in the euro area. Regulators say the move helped stem risk from an overheating property market.
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