40% Fall in Housing Loans, 60% in Consumer Loans, After Slovenia Tightened Credit Rules

By , 21 Jan 2020, 09:32 AM Business
40% Fall in Housing Loans, 60% in Consumer Loans, After Slovenia Tightened Credit Rules Flickr - TaxRebate.org.uk, CC-by-0

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STA, 20 January - Data from the Slovenian Bank Association show that the number of loans approved by banks in Slovenia in November and December, after the central bank's new crediting restrictions kicked in on 1 November, plummeted.

Data from ten banks show that the number of consumer loans dropped by around 60% over October and the number of housing loans by around 40%.

The number of consumer loans totalled 10,015 in October, but decreased to 3,804 in November and 3,624 in December, whereas the number of housing loans dropped from 1,424 in October to 923 in November and 812 in December.

The new rules took effect after Banka Slovenije announced them on 9 October in a bid to curb imprudent consumer lending practices.

The association noted that Banka Slovenije data also showed a steep drop in both types of loans after a major rise in October.

It added the surge was most probably a result of the central bank's announcement of the new rules, which prompted many to take out loans while still creditworthy.

The restrictions include a maximum 84-month maturity for consumer loans, down from 120 months recommended in 2018, and, most notably, curbs on housing loans.

Banks for the most part have to keep loan-to-value ratios (loan payments relative to the client's annual income) to below 50% for clients with monthly income of up to twice the gross minimum wage and below 67% for those making more than that.

Households with children are subject to additional restrictions since a certain monthly allowance needs to be left over for each child.

After the announcement of the new rules, the association estimated over 300,000 individuals would no longer be creditworthy.

Earlier this month the central bank said it was too early to fully assess the effect of the stricter rules.

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