The Croatian National Bank (HNB) said that risks to the country's financial stability remain elevated amid rapid growth in mortgage lending and housing prices. According to the regulator, the value of real estate and lending volumes are increasing faster than household incomes, which can lead to the accumulation of imbalances in the economy.
HNB noted that so far the situation is supported by a strong labor market and rising wages, however, in the event of a slowdown in the economy, the high debt burden of households can become a serious risk factor. In addition, the continued rise in real estate prices increases the likelihood of a more significant market correction in the future.
The regulator considers the growth of interest rate risks to be another threat. In recent years, banks have significantly increased the volume of long-term fixed-rate loans and investments in debt securities, which makes them more sensitive to possible interest rate increases. As a result, financial institutions are increasingly returning to issuing loans with a floating rate after the initial fixed period.
To reduce potential risks, the Croatian National Bank has already introduced a number of measures, including restrictions on certain types of lending.
Source: Croatia News
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