Requirements for LTV, DSTI and DTI limits

The European Systemic Risk Board (ESRB) has included LTV (loan-to-value), LTI (loan-to-income), DSTI (debt service-to-income) and DTI (debt-to-income) requirements among the macroprudential instruments[1] that national authorities can use to support financial stability on top of the instruments contained in CRD IV. The aim of these instruments is to limit excessive risks related to the property market.

Since 2021, Act No. 6/1993 Coll., on the Czech National Bank (pdf, 278 kB)[2] has enabled the CNB to set binding upper limits on the LTV, DSTI and DTI ratios for all providers of consumer credit secured by residential property in connection with the identification of the systemic risks relating to those loans.

The CNB regularly assesses (at least twice a year) consumer credit secured by residential property and the overall situation on the mortgage market and the residential property market. Based on macroprudential analyses and the information it gathers in the course of financial market supervision, the CNB issues:

  • Provision of a general nature on setting upper limits on credit ratios (since 2021), setting the specific values for the upper limits of the LTV, DSTI and DTI credit ratios, and
  • Recommendation on the management of risks associated with the provision of consumer credit secured by residential property (since 2015, hereinafter the “Recommendation”[3]). Until 2021, the Recommendation contained a summary of recommended limits for selected credit ratios and a set of other rules, the observance of which constituted prudent behaviour when conditions on the financial market are taken into account. Since 2021, it contains selected conditions related to the provision of mortgage loans, which are not regulated by the Act on the Czech National Bank and specified by the provision of a general nature, e.g. maximum maturity, acceptable methods of principal repayment, increasing the principal of an existing mortgage loan.

Currently set credit indicator limits

The currently set upper limits for credit ratios:

  • Maximum LTV: 80% (90% for applicants under 36 years if the loan is for the purchase of owner-occupied housing)

5% volume exemption under Article 45a(1) of Act No. 6/1993, on the Czech National Bank.

Brief overview of the main changes in the provisions of a general nature issued

Recommendation on the management of risks associated with the provision of consumer credit secured by residential property

Brief overview of main changes in Recommendations issued

Overview of the characteristics of new consumer loans secured by residential property

[1] Recommendation of the ESRB on intermediate objectives and instruments of macro-prudential policy (ESRB/2013/1).

[2] As amended by Act No. 219/2021 Coll.

[3] The former title Recommendation on the management of risks associated with the provision of retail loans secured by residential property was adjusted in 2021 to correspond with the terms used in the Act on the Czech National Bank.