2025 Brings Financial Relief for Home Builders

This is because the strict lending rules imposed on banks by the so-called KIM regulation will expire in mid-2025. In addition, the end of the KIM regulation coincides with falling interest rates, which should generally make loans more affordable again.

Real Estate Loans Will Become More Affordable in 2025

The KIM regulation was introduced in 2022 with the aim of preventing over-indebtedness of borrowers and defaults for banks. According to the strict provisions, the equity portion when taking out loans must be at least 20 percent, and the repayment rate must not exceed 40 percent of the available net household income. These criteria will be relaxed with the end of the provision.

Hope for Revival in Housing Construction

The real estate industry hopes that the abolition of the regulation will stimulate the recently very weak housing construction. A role may also be played by whether the many households, unsettled by the weak economic situation, are willing to spend more money on consumption and possibly also on a home of their own. It remains to be seen when and to what extent the banks will pass on the interest rate cuts of the European Central Bank (ECB) to the borrowers.

The Financial Market Authority (FMA), which keeps an eye on the stability of the banking sector, recently dampened the expectations of consumers and representatives of the construction industry. It continues to see a high risk of defaults and will therefore closely monitor how banks handle lending even after the regulation. If these loosen their criteria too much, the authority wants to intervene at the level of individual banks.

(APA/Red)

This article has been automatically translated, read the original article here.