Austrian Financial Market Authority issues post-KIM-V housing loan circular setting 90% loan-to-collateral, 40% net-income and 35-year term benchmarks with conditional flexibility

The Austrian Financial Market Authority has published a circular on the sound granting of private residential real estate loans that sets the supervisory framework for new lending after the KIM-V expires on 30 June 2025, implementing an instruction from the Financial Market Stability Board. The circular keeps the KIM-V’s core lending standards as the benchmark for sound loan origination, while allowing banks to deviate from them where this can be justified. At the centre are three rules: a maximum 90% loan-to-collateral ratio, repayment instalments capped at 40% of annual income after tax, and a maximum term of 35 years to support repayment before retirement. Where banks depart from these benchmarks, they must be able to demonstrate that their risk strategy covers the higher risk appetite, which may imply higher capital requirements. The FMA noted that residential property loans rose by two thirds to EUR 5.2bn between January and April 2025 amid falling interest rates and warned that, despite a recent easing in the earlier divergence between property prices and income, real estate remains significantly overvalued and systemic risks could re-emerge, potentially leading the Financial Market Stability Board to consider a measure like the KIM-V again if banks’ capital ratios were to weaken.