From 1 October 2024, new mortgage lending rules came into force in Bulgaria

The Central Bank of the Republic of Bulgaria (BNB) has approved new measures that came into effect on 1 October. These changes concern mortgage lending and are aimed at stabilising the property market, as well as reducing risks for the country's financial system. The measures cover both borrowers and banks, contributing to a more sustainable economic environment. Let us look at the main changes and their impact on the property market.

One of the key innovations is the limit on the share of financing that a bank may provide for a mortgage. Banks may now issue no more than 85% of the value of a property, which reduces risks for banks and lowers the debt burden on borrowers. Previously, many banks already adhered to these limits, financing between 80% and 85% of the value of a home, and in rare cases up to 90%. Now this practice has been officially established.

The second change concerns the borrower's debt-to-income ratio. Under the new rules, monthly mortgage payments must not exceed 50% of the household's total income. This is intended to prevent financial difficulties for borrowers. However, many banks were already using similar criteria to assess clients' solvency.

The maximum term of a mortgage loan is now set at 30 years. In reality, however, the average repayment period for loans in Bulgaria is around 15 years, since most borrowers strive to pay off their loan sooner.

For most borrowers, the new rules will not lead to significant changes. Banks are already operating within similar standards, and obtaining a mortgage is unlikely to become more difficult. The 85% financing limit corresponds to current market conditions and will not become a serious obstacle for buyers.

Despite the tightening of the rules, experts do not forecast a slowdown in the property market. Demand for housing, especially in the major cities, remains high, which supports price growth. Limited supply on the market and strong interest from buyers after the resort season will continue to influence the market.

The main purpose of the changes introduced by the BNB is to prevent the market from overheating. Limiting lending volumes and observing financial standards contribute to long-term stability in the housing market. It is expected that 2025 may prove even more successful than the previous year, thanks to sustained demand and strong interest from buyers.

Ultimately, the new mortgage lending requirements will not cause significant changes for borrowers, and the property market will continue to develop at a moderate pace, supported by active demand and rising prices.