The Financial Stability Committee of the National Bank of Georgia (NBG) amended the rules for issuing mortgage loans. Under the new terms, banks will have to take into account the risk of a credit interest rate shock, while assessing the borrower's solvency, which will be set at 3 percentage points.
According to the National Bank, these amendments are necessary to prevent financial risks created by the increase of interest rates on mortgages tied to floating rates.
The change should take effect from May 1, 2022.
“Main share of mortgage loans has a variable rate, accompanied by interest rate risk, which is particularly significant for rising interest rates on the USD and EUR on the world markets. To meet the buffers required to respond to this risk, commercial banks must take into account the 3 percentage point interest rate shock when assessing the borrower's solvency while issuing a mortgage loan with a variable rate. The new amendments will be effective from May 1,2022,” the NBG said in a statement.
It is still unclear how much expensive will mortgage loan get.
