The Slovenia Times

Law passed to make mortgages more accessible

The headquarters of the Slovenian central bank, Banka Slovenije.
Photo: Daniel Novakovič/STA
File photo

The National Assembly has passed a law designed to reduce the impact of the annual increase in the minimum wage on households' creditworthiness after the latest increase rendered much of the population ineligible for a mortgage.

Amendments to the macro-prudential supervision of the financial system act will allow the central bank to adjust lending restrictions independently of legislation which determines what amount of money borrowers need to have left on their account after they have paid off their loan instalment.

Every time the minimum wage rose, the required amount of credit that had to be left on the borrowers' bank account after paying their loan obligations increased accordingly, which in turn affected their creditworthiness.

Now, the central bank will no longer be obliged to follow that rule but will be able to set a different benchmark.

The amendments were tabled after the statutory minimum wage rose from €778 to €878 net in January. This impacted the creditworthiness of borrowers whose earnings range from minimum to average wage.

The amendments were carried unanimously by 77 votes. All deputy factions supported the idea that borrowing should be made more accessible to households.

"We hope that the banking regulator will act sensibly and also give people on lower incomes a fair assessment of their creditworthiness," said Soniboj Knežak, an MP for the Social Democrats. "The law is well-intentioned," added Jernej Vrtovec of the New Slovenia (NSi).

The central bank has not yet indicated how it will set the new standard, nor is it clear how soon any new rules will affect bank lending.

In general, banks are supportive of the move since lending has started to decline, partially due to higher interest rates and requirements stemming from the higher minimum wage.

NLB bank CEO Blaž Brodnjak, one of the fiercest critics of the restrictions, welcomed the proposal when it was first unveiled.

He said NLB hoped it would be put into practice as soon as possible, even as he lamented the central bank took "statistical" view of Slovenian consumers.

NLB said the central bank could have interpreted the rules differently before, but now there would be no excuse any more.


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