Banks urged to make it tougher to give a mortgage

The Central Bank has issued new guidelines to set out the procedures and guidance to be followed by banks to determine borrowers’ repayment capacity when granting credit facilities for the purchase/construction of residential properties in Mauritius. 

According to the “Guideline on the Computation of Debt-to-Income Ratio for Residential Property Loans” issued by the Bank of Mauritius, commercial banks have to maintain “sound lending standards” when granting credit facilities for the purchase/construction of residential properties. 

In this context, the debt-to-income (DTI) ratio is commonly used by banks in Mauritius as a microprudential measure to assess borrowers’ repayment capability. 

The Bank of Mauritius said it is introducing the DTI ratio as a macroprudential measure in view of its concerns on the increase on the level of household indebtedness and to ensure that borrowers are not overleveraged whenever they borrow for the purchase/construction of a property. 

Further, the Bank has encouraged banks to apply consistently their internal prudential DTI limits when granting credit facilities to other sectors.