June 10, 2019 / 2:45 PM / a year ago

Czech cabinet relaunches bill to give central bank more say on mortgages

PRAGUE, June 10 (Reuters) - The Czech government approved a bill on Monday intended to give the Czech National Bank (CNB) wider powers to regulate the mortgage market, the Finance Ministry said.

It is the second time the bill, which gives the bank the authority to set limits on mortgages in relation to borrowers’ income, will go to parliament after lawmakers rejected it in August 2017, two months before the last election.

The central bank wants to rein in the housing market, where high demand from clients whose income has grown steadily has pushed prices up dramatically.

A lack of new housing, due in part to a lengthy approval process, especially in the capital Prague, has meant that the per-square-metre cost of a new apartment in Prague jumped 19 percent last year to 101,000 crowns ($4,460), according to a survey by three leading developers.

Currently, the central bank recommends - but cannot prescribe - to banks that the loan-to-value ratio (LTV) should not exceed 80% for most of their clients, while monthly payments should not exceed 45% of net monthly income.

A client also should not have an overall debt of more than nine times net annual income under current central bank guidelines.

Most banks tend to observe the guidelines to avoid potential regulatory scrutiny.

With the bill, the central bank would be able to set a binding limit for one, two or all three of the indicators, the ministry said.

The bill has to pass both houses of parliament to become a law, a process that usually takes several months. ($1 = 22.6660 Czech crowns) (Reporting by Robert Muller)

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