Kai Hartmann Photography / BaFin
BaFin's offices, Frankfurt am Main
Germany’s financial regulator BaFin has announced it will halve the systemic risk buffer for residential real estate loans from 2% to 1%, effective 1 May 2025. The move follows signs of cooling in the housing market and is designed to ease capital requirements for banks—potentially making home loans cheaper for borrowers.
BaFin’s decision comes after a two-year review, as required by German law, and follows its March 2024 stress test, which still showed elevated risk indicators in housing finance. However, the regulator now sees reduced overheating risks, despite ongoing macroeconomic headwinds and geopolitical uncertainties.
“The market remains vulnerable, but the acute pressure has lessened,” said BaFin, which will continue to monitor conditions closely. The countercyclical capital buffer remains unchanged at 0.75%.
The systemic risk buffer—originally introduced in 2022—was aimed at containing systemic risks in the residential mortgage market after years of rapid price inflation. While banks had been required to hold €5 billion in additional capital under the rule, BaFin estimates the reduction will not compromise financial stability. Most institutions are already carrying capital buffers in excess of €20 billion.
Despite the easing, BaFin continues to warn of possible default risk due to Germany’s economic slowdown and fragilities in the labour market. The AFS, comprising BaFin, the Bundesbank, and the Finance Ministry, endorsed the buffer cut.
REFIRE understands that lenders are seemingly welcoming the move, though no widespread loosening of credit standards is expected in the short term.