The new Decision on Temporary Measures for the Banks Related to Housing Loans to Natural Persons (the “Decision”) adopted by the National Bank of Serbia (the “NBS”) entered into force on 13 September 2023. The Decision has been adopted as part of the NBS’ efforts to ensure the stability of the financial sector and to protect citizens from present uncertainties related to variable interest rates. It will be effective until 31 December 2024 (“Effective Period”).
Within the sense of the Decision, a housing loan is a loan in the amount of up to EUR 200,000 which is approved to the debtor for the purchase of housing real estate and which is secured by a mortgage on housing real estate. Natural persons who are users of first housing loan are considered as debtors.
In relation to housing loans approved prior to 13 September 2023, the Decision limits the variable interest rate during the Effective Period to 4.08%. An exception is applicable to housing loans which were approved after 31 July 2022 and before 13 September 2023, for which at the time of entering into the loan agreement the variable interest rate was higher than 4.08%. For these loans, the variable interest rate during the Effective Period may not exceed the rate from the initial repayment schedule provided to the debtor when entering into the agreement. The variable interest rate is limited only in terms of increase, while in case of decrease below the limits the banks are obliged to adjust the amount of the rate in accordance with the loan agreements. The limits are applicable starting from the repayment instalment which becomes due in October 2023.
In relation to housing loans approved during the Effective Period, the banks’ margin in variable interest rates during the Effective Period is limited to 1.1%, while after the Effective Period the agreed margin will apply. Also, during the Effective Period the banks may not agree on fixed interest rates on housing loans higher than 5.03%.
Importantly, the Decision prohibits the banks from requesting the debtors the part of the interest which was not calculated and accrued due to the application of interest rates prescribed in the Decision.
In addition to limitations on interest rates, the banks are obliged, during the Effective Period, to enable natural persons who do not use financial services for commercial activities, entrepreneurs and farmers, to make free of charge partial or full prepayment of a housing loan, irrespective of the prepayment amount. In case of partial prepayment, the banks must enable such user to choose between keeping the original repayment period or shortening the repayment period in accordance with the user’s request.
It is apparent that the imposed measures will be endorsed by the debtors of housing loans, given the significant increase of variable interest rates recently and uncertainty in the times ahead. What is yet to be seen is the effect that the measures will ultimately have on the banking sector and the wider economy.
* Partner and Associate refer to independent Attorney at Law in cooperation with Karanović & Partners
The information in this document does not constitute legal advice on any particular matter and is provided for general informational purposes only.