BoA measures fail to stop home loans, they increased by 35% in October

2025-12-01 08:00:59, Ekonomi CNA

Home loans continued to grow in October, confirming a low sensitivity to the restrictive measures applied by the Bank of Albania.

Central Bank statistics show that in October, the banking sector provided a total of about 4.7 billion lek in new loans for the purchase of housing, with an increase of 35% compared to October last year.

In the July-October period, which coincides with the entry into force of the Bank of Albania's restrictive measures, new home loans reached 18.5 billion lek, an increase of almost 23% compared to the same period in 2024.

The 10-month progressive data shows that the value of housing loans has reached a new historical record for this year. The banking sector disbursed a total of 54.7 billion loans, 26.6% more compared to the same period a year ago.

The total active housing loan portfolio at the end of October reached 238.1 billion lek. Compared to a year earlier, this portfolio has expanded by 18.4%.

Credit to individuals, including its largest segment, home loans, is making the main contribution to the growth of credit to the economy this year.

Since July 1 of this year, banks are required to respect several risk management criteria, specifically for the indicators "Loan-to-value ratio" (the percentage of the purchase price of the apartment that the bank undertakes to finance through the loan) and "Debt service-to-income ratio" (the ratio between the installment or installments of the property loan to the borrower's income).

The ceiling loan-to-value ratio in Lek will be 85% for the first home and 80% for the second home, while in foreign currency 75% for the first home and 70% for the second home.

The debt service to income ratio for loans in Lek will be at the level of 40% for the first home and 35% for the second home. In foreign currency, the ceiling level will be 35% for the first home and 30% for the second home.

According to the Bank of Albania, the implementation of these limits will enable the reduction of the risk of borrower failure and the reduction of banking losses associated with these loans, as a result of possible unfavorable developments in real estate prices or in the country's macroeconomic framework.

These measures follow the application of countercyclical additions to the capital adequacy ratio last year, totaling 0.5%. This increase is intended to slow down lending by the banking sector. These measures were advised by the International Monetary Fund, but nevertheless, at least in the first phase, they have not had a significant effect.

In its latest statement on Albania, the IMF mission states that the recent activation of borrower-side measures for new residential real estate loans fills a previous gap and should become a permanent tool. The IMF even recommends the introduction of a sectoral capital addition for systemic risk, higher risk weights or other measures targeting borrowers as additional means to address the increasing risks from commercial real estate lending./ Monitor.al