The Bank of Albania said it has introduced measures to tighten mortgage lending, aiming to reduce risk in the housing loan market and ensure banks follow consistent standards.

The regulator’s supervisory council limited the loan-to-value and loan installment-to-income ratios applied to residential real estate loans, targeting a reduction of bank losses in the event of falling property prices, rising unemployment, lower incomes, or interest rate shocks, the central bank said in a press release on Wednesday.

The measures are not expected to limit current lending, since most banks already follow similar or stricter rules, the central bank said.

For loans in Albanian lek, people can borrow up to 85% of a property's value if it is their first home, and up to 80% if it is a second home or being bought to rent out. For loans in foreign currency, there is a 75% limit for a first home and 70% for other properties.

The value of loan installments must not exceed 40% of the borrower’s monthly income for the first home, while the limit for a second home loan has been set at 35%.

The decision follows a recommendation by the International Monetary Fund (IMF) for the central bank to introduce limits on the two indicators, as stated by Anke Weber, head of the IMF mission in Albania, in an interview with local economic news outlet Monitor in January.