As the national housing crisis continues, a new set of measures will be introduced to help create balance in the sector.
Starting 1 January 2021, banks will operate with new conditions for real estate loans. The Financial Sector Supervisory Commission (CSSF) has created a new set of standards to guarantee the long-term balance of the sector. Avoiding massive debts by private citizens is considered to be of upmost priority.
A person who wants to buy their first apartment or house will no longer be able to apply for a loan greater than the actual buying price. Yves Maas, director of the Luxembourg Bankers' Association (ABBL) noted that most institutions are already complying with the novel standard. Some banks used to hand out greater loans however, which may have included costs for interior utilities or administrative work.
Although risk management has been considered acceptable thus far, Maas warned that the pandemic may still be followed by repercussions that make it difficult or impossible for people to pay back their debt.
A further regulatory change surrounds property owners who want to make a second purchase. In such cases, people need to be able to cover at least 10% of the buying price. In case the apartment or house is meant to be rented out, buyers need 20% own capital.
These new measures are designed to help prevent households from overburdening themselves with extensive loans, the Luxembourg Consumer Association (ULC) conveyed. It is also expected to lower the rate of real estate speculation.
The final text is still being concluded by CSSF and will be published over the course of the week.
