Measures to curb home loans did not have drastic effects in the first month of application

2025-08-30 08:37:00, Ekonomi CNA

Measures to curb home loans did not have drastic effects in the first month of

In July of this year, measures imposed by the Bank of Albania came into force, for the application of certain mandatory risk criteria in lending for the purchase of housing by individuals.

Preliminary data from the Bank of Albania show that the entry into force of regulatory restrictions does not appear to have had a dramatic effect on curbing home loans. During July, the banking sector granted around 4.65 billion lek in new home loans. Lending increased by 12.5% ??compared to July last year.

The value of the loan, however, suffered a significant decline compared to the record value of 7.4 billion lek in June; however, the very large lending figures in June mainly reflected the rush to make as many disbursements as possible before the new rules came into effect.

Starting from July 1, banks will be required to comply with certain 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.

In fact, similar criteria have always been applied by banks in their internal policies, but in recent years an increase in cases has been observed when banks have offered loans in excess of the above limits.

So far, home loans in 2025 are marking historic highs. In seven months, banks have granted a total of almost 41 billion lek in loans, up 29% compared to the same period a year ago. The total active portfolio at the end of July reached 232 billion lek. Compared to a year ago, this portfolio has expanded by 17%. Loans to individuals, including its largest segment, home loans, are making the main contribution to the growth of credit to the economy this year./ Monitor.al