Mortgage Loan (Hypothekarkredit)

Definition and legal basis

A mortgage loan (Hypothekarkredit) is a loan secured by a pledge on a property — the Hypothek (mortgage lien). The lien is registered in the land register (Grundbuch) and gives the bank the right to enforce against the property if the borrower defaults. In exchange for this strong collateral, rates sit well below those of unsecured consumer loans.

In Austria the mortgage loan is governed by the Hypothekarbankengesetz and, supplementally, by the General Civil Code (ABGB). For consumers, the Mortgage and Real Estate Credit Act (HIKrG) — which transposes the EU Mortgage Credit Directive (MCD) — also applies.

KIM-V: tighter lending standards since 2022

A defining feature of the Austrian market is the KIM-V — the FMA's regulation on residential property finance. In force since August 2022, it sets binding limits:

• Loan-to-value (LTV): maximum 90% of market value
• Debt-service-to-income (DSTI): maximum 40% of net disposable income
• Term: maximum 35 years (for owner-occupied residential property)

Banks may issue a limited quota of exceptions per quarter but must respect the aggregate limits. After several years of weakness in the Austrian mortgage market, the FMA is debating a partial loosening in 2026 — a final decision is still pending.

Fixed or variable — the key choice

Austrian mortgage loans are predominantly variable-rate, linked to the 3-month Euribor plus a margin (1.0-2.0 percentage points). Fixed-rate periods of 10, 15 or 25 years are available but more expensive.

Indicative conditions, June 2026 (after the ECB cut to 1.75%):

• Variable (Euribor + 1.4%): currently around 3.8% per year
• 10-year fixed: 3.9-4.3% per year
• 20-year fixed: 4.1-4.6% per year

The yield curve is flat; the fixed-rate premium of about 30-50 basis points is historically low. With uncertain rate outlook, locking in can pay off — though the prepayment penalty in case of early repayment needs to be weighed.

Tax treatment

Mortgage interest on an owner-occupied home is no longer deductible in Austria since the special-expense rules expired in 2020. For let or leased property, by contrast, interest counts as a Werbungskosten (deductible expense) and reduces taxable income. The principal repayment itself is never deductible — it represents wealth-building, not expense.