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Debt-to-income (DTI) ratio
The limit on the DTI ratio, an indicator of total indebtedness, mitigates the risks from rapid growth in household indebtedness. Over-indebted households may have serious repayment difficulties, and their problems may eventually spill over into the whole financial sector and economy.
Limit
A loan may not be granted if the household’s resulting outstanding debt, including debt on any other loans, would exceed eight times its annual income.
Exemptions
- For up to 5% of new loans, the DSTI limit of eight may be exceeded
- For up to a further 5% of loans that are mortgages for young people, the DSTI limit is set at nine
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Further details about exemptions
- Mortgage loans for young people are for young people aged up to 35 and they may up to 1.3 times the average wage
- The periods over which compliance with both exemptions is checked are the first and second halves of the year. In a given quarter, the exemptions may amount to up to 7% of new loans
Calculation
| Debt | New loan Existing loans 20% of undrawn credit card and overdraft facilities |
| Annual net income | Annual income after contributions and taxes (documented and independently verified) |
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Illustrative calculation
A married couple with two children and a total net income of €1,400 apply for a housing loan with an interest rate of 1.0% and a maturity of 30 years.
Annual net income (12 × net income) €16,800 Maximum loan (8 × annual net income) €134,400 The maximum loan amount is €134,400.
Legislation
The statutory framework comprises the Housing Loan Act and Consumer Credit Act.
In addition, Národná banka Slovenska has laid down detailed provisons on the DTI calculation and DTI limits in the Housing Loan Decree (in Slovak language only) and Consumer Credit Decree (in Slovak language only).
Further information can be found in financial stability legislation.
