The government is preparing to strengthen regulators’ powers to ward off a possible bubble in Germany’s real estate market, Handelsblatt has learned.
A forthcoming draft law, to be completed by the German Finance Ministry in the coming days, would allow financial regulator BaFin to restrict mortgage lending if it sees a threat to financial stability.
If approved, the proposed law would give BaFin the ability to cap debtors’ mortgage payments in relation to their income, link credit volumes to real estate market values and tighten loan repayment rules.
Aimed at preventing excessive debt and limiting the probability of mortgage defaults, the measures could force property buyers to put down more equity when purchasing real estate.
The draft comes as German lawmakers and regulators seek to protect the country’s hot property market from the kind of loose lending that led to a wave of residential mortgage defaults in the United States after its real estate bubble burst in 2007 – jeopardizing banks and ultimately endangering the entire financial system.