New rules for those planning to take out a housing loan - banks have stiffened criteria this year, and citizens with average earnings will in principle be granted smaller loan amounts. Experts warn that citizens will have to take out loans on longer repayment terms, and in this way, they will pay more interest to banks.

U search for an apartment, Krunoslav could soon face an obstacle. Due to the HNB's directive, banks have tightened the issuance of housing loans since this year. "On the one hand, it is good, as it will protect people from taking on too much debt, maybe they think a bit too much about finances, or for some reason, they lose their pay, and they get into trouble, and on the other hand, it will be much harder for them to come by an apartment, a house, or anything else they want to buy, and they will spend much longer in rental", says Krunoslav Šarić, a future loan user. Due to the amendments to the Mortgagor Law, where instead of two-thirds of their income, three-quarters must be secured, the HNB ordered banks to slow down and see who and what amounts of loans they give.

Those with average income will be hit hardest

"The ones who will be hit the hardest will actually be the citizens with an average, or close to average, income in the Republic of Croatia. They will be able to borrow much less, up to 30 percent lower loans", says financial advisor Vjeko Peretić. For example, let's take a couple with a 12,000 kuna income together. For a 30-year repayment term, with an average interest rate of 3.8 percent, they could borrow up to 187,000 euros in loans last year, with a repayment of 6.5 thousand kuna. Since this year, the bank should not give them more than 103,000 euros, and the repayment should not exceed 3,600 kuna. "In turn, citizens will have to go on longer repayment terms, which means they will pay more interest to banks, as well as, it will be more expensive for them to finance their property. A large part of citizens will have to involve intermediaries to realise the loan, which they could have done practically on their own before", explains Peretić.

Strengthened conditions will also affect the sale of apartments

The tightened conditions for borrowing will likely have a negative impact on the sale of apartments, believe the Croatian Chamber of Commerce. "Everyone would like to take care of the loan as soon as possible, and the longer they take to repay it, the more expensive the property becomes. So, it's almost certain that this will be something that will deter some buyers from buying, which is not a good situation that will stimulate the market and with all other uncertainties that people have, this could contribute even more to that psyche where people don't decide to buy", says Lana Mihaljinec Knežević, the Business Association of Estate Agents at the HGK. Out of the total number of housing loans in Croatia, only 6.5 percent of borrowers diligently fulfill their obligations. However, the state has decided to tighten the rules. According to estimates by bank managers, the issue of housing loans will this year decrease by a third.

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