(Bloomberg) -- The Czech central bank took the first step to ease lending conditions after the highest interest rates in more than two decades curbed credit growth and cooled the property market.
The policy board on Thursday softened approval standards for mortgages and lowered one of the capital requirements for lenders. The Czechs are fine-tuning their strategy to balance the need for a continued fight against double-digit inflation and allowing easier access to home ownership at a time of declining real wages.
“Exactly because monetary policy is currently so tight, we can afford to ease these upper limits of lending criteria,” board member Karina Kubelkova told reporters after the quarterly meeting on financial stability.
The bank agreed to scrap the debt service-to-income limit for mortgages, while keeping the loan-to-value and debt-to-income ratios unchanged. It also lowered the so-called countercyclical capital buffer rate for lenders by a quarter of a percentage point to 2.25%, effective from July.
Read more: Czech Cabinet, Central Bank Seek United Front in Inflation Fight
A combination of tight monetary policy, strict approval standards and a cost-of-living crisis have slashed Czech mortgage numbers, reversing a pandemic-era property frenzy.
The regulator’s stress tests also showed that the Czech banking sector has enough capital and liquidity to withstand shocks even in the event of longer-lasting economic problems.
--With assistance from Deana Kjuka.
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