CNB does not expect tighter rules for investment mortgages to affect housing prices

The Bank Board of the Czech National Bank (CNB) does not expect that stricter rules for mortgages used to finance investment property purchases will have a significant impact on housing prices or on the overall volume of new mortgage lending. According to the CNB, the primary objective of the measure is to reduce credit risk rather than to influence market dynamics.

This follows the publication of minutes from the Bank Board’s meeting on financial stability held at the end of November. At the meeting, the Board recommended that banks tighten conditions for investment mortgages from April 2026 by requiring higher borrower capital and introducing limits on total indebtedness relative to income.

The Board agreed that mortgages taken out for investment properties are generally riskier than those for owner-occupied housing and are more likely to default in the event of an economic downturn. In such a scenario, repossessed properties could contribute to greater volatility in property prices, potentially affecting the valuation of owner-occupied housing loans on banks’ balance sheets.

Under the CNB’s definition, an investment purchase includes the acquisition of a third or subsequent residential property, as well as properties bought primarily for rental purposes. In these cases, banks should apply a maximum loan-to-value (LTV) ratio of 70 percent, while the borrower’s total debt should not exceed seven times their annual income (DTI).

Bank Board member Karina Kubelková was the only member to vote against the recommendation. According to the meeting record, she noted that investors have various ways to adapt to the CNB’s guidance and therefore “it cannot be expected to have a significant impact on market development.”

Other Board members also concluded that the measures are likely to have only a limited effect on the total volume of newly granted mortgages and on real estate prices. However, they emphasised that the key purpose of the initiative is to reduce the risk profile of newly issued investment mortgages and to slow the growth of their share within overall mortgage lending.

Source: CTK