The Luxembourg Chamber of Deputies has adopted a new legal framework to limit mortgage indebtedness.
At the plenary session of 20 November 2019, the Chamber of Deputies adopted a draft law on macroprudential measures on residential mortgages. By completing the range of tools available to the Luxembourg authorities, the said law is aimed at preventing the "overheating" of mortgage loans and thus ensuring financial stability.
According to the Ministry of Finance, the law will not directly introduce conditions for the granting of real estate loans, but defines the legal framework for such measures.
Through this new framework, the Commission de Surveillance du Secteur Financier (CSSF), in collaboration with the Central Bank of Luxembourg (BCL), the Insurance Commission and the Systemic Risk Committee (CdRS), will be able to impose on banks and other financial players, when the time comes and if necessary, the compliance of new guidelines on credit criteria for residential real estate.
This law echoes the recommendation by the European Systemic Risk Board (ESRB) to Luxembourg, which had noted the existence of potential vulnerabilities in the medium-term due to rising property prices and the level of household debt.
