Upper limit on the payment-to-income ratio protects households as a debt capPrint
Budapest, 27 August 2014 - The MNB has adopted a new macroprudential regulation in order to prevent excessive household indebtedness and a renewed build-up of foreign currency loans. Basically, the debt cap regulation, to be introduced from 1 January 2015, will consist of two pillars. The payment-to-income ratio (PTI) will limit the maximum initial debt-servicing burden as a percentage of customers’ regular legal income, thereby moderating the accumulation of household debt. The loan-to-value ratio (LTV) will cap the maximum amount of secured household lending (e.g. mortgage loans) as a percentage of the value of collateral (the value of the property). The limits to be introduced will not result in an excessive tightening of access to forint loans; however, if the MNB perceives a strong increase in household borrowing, it will restrain the outflow of credit by tightening the debt cap.