2023-08-29 16:11:46
In the future, anyone who wants to take out a real estate loan in Austria may first have to go through special credit training. The President of the Austrian National Bank, Robert Holzmann, has now made this proposal, further enlivening the debate about limiting interest rate risks that has been raging for weeks. The plan would amount to a kind of credit driver’s license.
Andreas Mihm
Business correspondent for Austria, Central and Eastern Europe and Turkey based in Vienna.
The granting of real estate loans is generally handled more strictly in Austria than in Germany. However, in Austria, with 51 percent of the new mortgages granted since mid-2022, far more loans have variable interest rates than in Germany. According to the ECB, it is only 16 percent there.
In times of rising interest rates – and, according to ECB board member Holzmann, still rising – this leads to higher, sometimes unexpected burdens for borrowers. According to the banks themselves, they are not yet seeing any rise in default rates, but they have already made concessions to growing political pressure. In the event of a delay in payment, they want to waive reminder fees and default interest for a year.
Education instead of “interest rate cap”
Holzmann lacks enlightenment. Instead of an “interest rate cap” as demanded by some politicians, he is thinking of further training: “My suggestion would be mandatory training before a mortgage loan can be taken out,” he told the newspaper “Die Presse”. Such a loan is the biggest financial decision in most people’s lives. “They should spend a few hours dealing with the possible risks.” As a model, he cited the “event-oriented learning” introduced by some states in the USA after the financial crisis.
People need to learn to better assess credit risk before making decisions for “a few hundred thousand dollars” when their income is only a fraction of that. A bank advisor cannot do that in the short time of a “normal consultation”.
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Holzmann, who also advertised his idea on the Austrian radio, also has a suggestion as to how this borrower training should be organized. He sees “good opportunities for social partners and banks to get involved together”. In addition, with a loan of 200,000 euros, a few hundred euros for financial education, measured in terms of the potential risk, “play only a small role”.
However, Holzmann rejects the weakening of the equity rule demanded by banks and the construction industry. This provides for equity of at least 20 percent, and the credit rate must not exceed 40 percent of net income.
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