New stricter rules for Croatian loans take effect

From 1 July, Croatia introduced a new methodology for assessing citizens’ creditworthiness, making loan conditions stricter.

According to the new regulations, the maximum monthly loan instalment must not exceed 45% of income for mortgage loans and 40% for personal loans.

In addition, a stricter LTV ratio (up to 90%) is being introduced, calculated based on the lower property valuation, which further reduces the loan amount.

Early signs of the changes are already visible in the market.

Dražen Horvat, a credit brokerage expert at Fintastica, explained that the new measures primarily affect citizens with salaries above €1,600.

“For example, someone earning €2,000 who could previously secure a 30-year mortgage of €250,000 can now only borrow up to €200,000. The reduction can reach up to €50,000, and the gap widens with higher salaries. At €2,500, the difference is already €70,000,” Horvat told HRT.

He added that the situation is becoming increasingly challenging, as property prices remain high, making homeownership more difficult to achieve.

Despite the stricter conditions, the Croatian National Bank (HNB) predicts that around 20 per cent of loans can still be approved under the previous rules. “This makes it easier for clients to access credit,” Horvat explained.

Banks Offer Support Tools for Borrowers

Horvat noted that demand for housing loans remains strong, partly due to a regulation allowing a partial VAT refund on purchased properties.

He also stressed the importance of addressing financial difficulties early. “Banks have tools to help, but you need to contact them at the start. Ignoring problems is the worst approach. A common mistake is relying on short-term loans, overdrafts, and credit cards,” he said.

Potential solutions include loan moratoriums and refinancing, while more severe cases can involve legal measures such as protected accounts.

Inflation has caused interest rates to rise from 2–2.5 per cent to around 4 per cent, though they are now slowly decreasing to approximately 3–3.1 per cent.

“These are still among the lowest rates in Europe, much lower than in the past when rates reached 7 or 8 per cent,” Horvat noted. He also highlighted that banks calculate creditworthiness differently, giving an advantage to brokers who work with multiple banks.

Trends in Loans and Property Purchases

Interest in VAT refunds remains high, particularly for buyers under 45. Refunds of up to 50 per cent of paid VAT are possible, provided the property meets regulated size and price criteria and the contract was signed by 1 January this year.

Looking ahead, Horvat expects a slowdown in cash loans but remains optimistic about housing loans. “Restrictions will have an effect, but I anticipate only a slight decrease or slower growth. For mortgages, I’m positive, as the HNB allows 20 per cent of loans under old conditions, and interest rates continue to fall,” he concluded.