New mortgage lending rules in Bulgaria: what will change for borrowers and how the real estate market will react

In September 2024, the Central Bank of the Republic of Bulgaria (Bulgarian National Bank - BNB) adopted new measures, which come into force on October 1.

Changes in mortgage lending are aimed at stabilizing the real estate market and reducing risks for the country's financial system. These measures apply to both borrowers and banks, ensuring a more stable economic environment. Let's take a look at the main changes and their impact on the mortgage market and homebuyers.

One of the main innovations is the limitation of the share of financing that the bank can provide for a mortgage loan. Banks can now lend no more than 85% of the real estate value. This reduces risks for banks and reduces the debt burden on borrowers.

It is worth noting that before these changes, many banks already adhered to similar restrictions - 85% or even 80% of the value of the property. In rare cases, funding reaches 90%. However, this change formalizes existing practices and strengthens safeguards.

There is also a debt-to-income limit. The BNB has established a maximum ratio of the monthly installments under the mortgage loan to the income of the borrower - the installments must not exceed 50% of the total monthly income of the household. This measure is aimed at reducing the debt burden and preventing possible financial difficulties.

However, this requirement is not new for most banks, which already use similar criteria to assess the solvency of customers, ensuring their financial stability.

In addition, the maximum term of the mortgage is officially set at 30 years. In reality, borrowers rarely choose such long terms. The average repayment period for mortgage loans in Bulgaria is about 15 years, as many people strive to pay off their debts faster.

For most borrowers, the new requirements will not bring significant changes. Banks have long been working within these standards, and customers are unlikely to encounter difficulties in obtaining a mortgage. The 85% financing cap will also not be a deterrent for buyers as it is in line with current market conditions.

Despite the tightening of rules, experts do not predict a significant slowdown in the real estate market. Demand for Bulgarian housing remains high, especially in the capital and large cities. Buyers continue to compete aggressively for available properties, which keeps prices steadily rising.

Key factors driving the price increase include the limited number of new listings on the market and sustained buyer interest that has picked up since the end of the holiday season.

The main goal of the changes introduced by the BNB is to stabilize the market and prevent possible financial risks. Weak growth in mortgage lending and compliance with financial standards should support long-term housing market stability.

These measures are intended to prevent the market from overheating, not to slow it down.

The new requirements of the BNB for mortgage lending will not lead to drastic changes for borrowers. The real estate market is likely to maintain a steady pace of development, supported by strong demand and moderate price increases.