Since August 1, new Responsible Lending regulations have come into effect. They provide more opportunities for first-time homebuyers, which is most relevant for young people. However, these changes remind us that the decision to borrow should be based not only on today’s possibilities but also on long-term financial planning.
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Lower down payment – more opportunities, but not for everyone
One of the most important changes is that for the first time, the minimum down payment for residents buying their first home is reduced from 15 to 10 percent of the property’s value. This change can indeed help accumulate the required amount faster and bring homeownership closer.
However, it is important to understand that the 10 percent down payment will not be automatically applied to every buyer. Credit institutions will continue to individually assess each client’s financial situation – income received, existing financial obligations, credit history, and the value of the property being purchased. A lower down payment is an additional opportunity but not a reason to borrow more than what real financial capabilities allow.
Changes in income and payment ratio calculation
The assessment of the loan payment to income ratio is also changing. From August 1, one main requirement remains – the loan payment burden cannot exceed 50 percent of sustainable income, but it will be calculated using an interest rate of no less than 6 percent.
Until now, the maximum monthly payment could be up to 40 percent of sustainable income. This means that with lower interest rates in the market, the main limitation was often not the loan cost itself but the set portion of income that could be allocated to the loan payment.
From August 1, the evaluation logic changes – although the maximum payment portion increases to 50 percent of income, it is calculated using an interest rate of no less than 6 percent. This means that not only today’s ability to pay the loan is assessed but also financial resilience to potential interest rate increases.
Due to this resilience assessment, some residents planning to borrow larger amounts may need higher sustainable income than would have been required before the changes came into effect.
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When planning a housing loan, it is important to consider that although recently the interest rate environment has been more favorable for borrowers, uncertainty remains in the market regarding further decisions by the European Central Bank. Even a small increase in interest rates can significantly impact long-term financial commitments. For example, a 25 basis point increase in interest rates would raise the monthly payment on a 150,000 euro 30-year housing loan by more than 20 euros. Therefore, before borrowing, it is important to evaluate not only today’s payment but also whether the family budget would remain sustainable if economic conditions change.
Conditions change when buying a second home
Conditions are also changing for residents who already own a home and plan to take a second or subsequent housing loan. In such cases, the requirement for a down payment of no less than 30 percent will still apply, and the possibility to reduce it to 15 percent from August 1 will only apply if the borrower has repaid more than half of the initial amount of each existing housing loan. Meanwhile, residents changing homes due to changed life needs will still have the option to use the provided exception – to purchase a new home with a lower down payment, committing to sell the previous home within a reasonable period.
Housing – an important investment, but not without risks
It is important not to confuse a one-time increase in savings with long-term financial capacity. A housing loan is a financial commitment spanning several decades, so the decision to acquire it must be based on the ability to consistently meet financial obligations in the future.
Real estate is often considered a safe investment, but it also has its risks. Property value and rental income depend on economic cycles, interest rates, and market conditions. Property requires ongoing maintenance and additional expenses, and selling it quickly to liquidate funds can take time.
Owning a home can be an important part of financial security, but it should not become the sole financial goal or the only investment. Sustainable financial planning means balancing between building a financial reserve and the ability to adapt to changing economic circumstances. This balance ultimately determines not only the ability to acquire a home but also financial security at various stages of life.
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