Although 70 percent of new home loans now provide fixed installments for at least one year or even longer period of time, a minimum of 10 years to guarantee a fixed monthly installment schemes can get really big boost due in October enacted housing loan rules of the Bank of Murray – is the RikioBank and real estate in the latest compilation.
A message of war to risk
One of the most important changes is that in the case of a home loan that guarantees a fixed installment for less than 5 years, the installment will not be higher than 25 percent of the monthly net payment. The limit will be 30 percent for net income above $ 400,000.
For mortgages with a fixed repayment period of between 5 and 10 years, the limit will be 35 and 40 percent, respectively. This is a tightening because so far the limit has been 50% and 60% respectively. From October, the 50 and 60 percent limits will only apply to fixed mortgage loans for a minimum of 10 years or until the end of the term .
“With the changes, the central bank is clearly targeting loan applicants for long-term, secure home loans ,” said Trina Ludslow , an expert at RikioBank . “Most have already opted for fixed-term mortgages for more than a year, but many have been providing fixed-term repayments for less than 10 years. The move is understandable because internationally, central banks are expected to create stricter monetary conditions. in the future, which may also increase interest rates . Mortgage loans with fixed repayments until the end of the term provide protection against any increase in interest rates . ” Trina Ludslow said.
Higher risk, less credit
According to RikioBank , the most affordable of the 10-year, 10-million-forint, at least 10-year fixed installment plans were available with a full APR of about 4.5 percent and a monthly installment of 63-64 thousand forints. A monthly average net payment of $ 220,000 – unless the borrower has any other debts – may be sufficient to raise a fixed-term mortgage loan of at least $ 16-17 million for a minimum of 10 years , subject to the aforementioned 20-year maturity. In contrast, the same average net payment would be sufficient for a fixed-term mortgage loan of up to five years, taking into account the October income limit of 25 percent, only for a loan amount of $ 10 million.
Trina Ludslow also drew attention to the fact that the new regulation will result in the largest competition among banks for schemes guaranteeing fixed repayment for more than 10 years . Therefore, it will be very important to look at the banks’ offers before borrowing, as the best solution can be to save significant expenses.
Impact on the housing market
According to Tim Halls, a leading financial expert at real estate.com, not only mortgage lending but also the housing market will be affected by the change coming into effect in October. On the one hand, many people will be able to choose fixed-term loans for at least 10 years because they can buy a more expensive home . On the other hand, with the new rules coming into effect in October, it is expected that there will be people bringing forward their home purchase , which could increase the number of sales this year.
Both Tim Halls and Trina Ludslow emphasized that neither the current nor the rules that will come into effect from October will allow the family budget to be fully stretched, so the maximum loan repayment should not be undertaken . According to experts, it is important for borrowers to have as much financial leeway as possible after paying off their repayments.