National Bank of Bulgaria reports sharp fall in high DSTI mortgage lending after new credit standards took effect

The National Bank of Bulgaria published a supervisory review of household lending secured by residential real estate, assessing how banks are applying the new credit-standard limits introduced in September 2024 and effective from 1 October 2024. The review shows a marked reduction in new lending with debt-service-to-income (DSTI) above the 50% cap in the fourth quarter of 2024, while average loan-to-value (LTV) and maturities remained broadly unchanged. The requirements set LTV at origination (LTV-O) at no more than 85%, DSTI at origination (DSTI-O) at no more than 50%, and a maximum contractual maturity of 30 years, with limited scope for deviations each quarter of up to 5% of the previous quarter’s gross value of new or renegotiated loans. New residential real estate-backed lending in the banking system edged down to BGN 2.16bn in the fourth quarter of 2024 from BGN 2.19bn in the prior quarter. The share of new loans with DSTI-O above 50% fell to 3.1% from 24.6%, and the weighted-average DSTI-O declined from 39.1% to 36.8%; LTV-O and maturity stayed around 74% and 25.2 years. Banks reported 421 new loans exceeding the limits (4.2% of 10,140 loans) totalling BGN 118m, equivalent to 5.4% of the prior quarter’s gross new lending; most such loans clustered at DSTI-O between 50% and 60% while remaining below the LTV and maturity thresholds. By end-2024, the gross stock of these household loans reached BGN 27.6bn (22.9% of loans and advances and 14.3% of total banking-system assets) and non-performing loans in the portfolio fell to BGN 285m, bringing the non-performing loan ratio to 1.03%.