December 12, 2019 / 4:16 PM / a month ago

Slovenia to offer state guarantees to support mortgage market

LJUBLJANA, Dec 12 (Reuters) - Slovenia’s finance ministry has drafted legislation aimed at helping people take out mortgages, by offering state guarantees on a combined 500 million euros ($551 million) worth of such loans, the ministry told reporters on Thursday.

The Bank of Slovenia from November imposed restrictions on consumer loans saying that borrowers’ debt costs can no longer exceed 67% of their income, effectively limiting people’s ability to take out big loans such as mortgages.

The envisaged state guarantees will be offered to young families or people up to 40 years of age who find it difficult to get mortgages. They will be offered for loans with maturities of up to 30 years from Slovenian banks.

The ministry expects the government to pass the new law in February, after which parliament will have to confirm it, state secretary Alojz Stana said.

Prime Minister Marjan Sarec and other politicians have criticised the central bank’s restrictions, but the government has no direct influence over the bank’s decisions.

“We expect that the Bank of Slovenia will reconsider its decree once this law is enforced,” Stana said, adding that state guarantees are also expected to enable banks to reduce the interest rates on the loans they extend.

Guarantees on mortgages valued at up to a combined 200 million euros per year will be offered next year and in 2021, with the remaining sum being offered until the end of 2030.

Stana also said the ministry does not expect state gurantees to have a significant influence on the budget surplus, public debt and household spending. ($1 = 0.9073 euros) (Reporting by Marja Novak; Editing by Hugh Lawson)

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