What CRR3 changed in how banks value mortgage collateral

What the rule said before

Until the end of 2024, Article 229(1) of the CRR said only that the collateral "shall be valued by an independent valuer at or at less than the market value". Member States with statutory rules for mortgage lending value could use that value instead. The bank then reduced it "as appropriate" for the results of monitoring and for prior claims.

The old wording left two gaps. A rising market lifted collateral values, and with them the capital relief a bank took, at the moment risk was building. And "at or at less than the market value" said nothing about how a revalued figure should behave over a cycle.

CRR3 replaced the paragraph. Recital 19 gives the reason in one sentence: "It is important to reduce the impact of cyclical effects on the valuation of immovable property securing a loan and to keep own funds requirements for mortgages more stable."

Key dates

1. 19 June 2024

   CRR3 (Regulation (EU) 2024/1623) is published in the Official Journal

   Official Journal L, 19 June 2024
2. 1 January 2025

   CRR3 applies: collateral is recognized at its property value under the new Article 229(1)

   Regulation (EU) 2024/1623, Article 2
3. 11 January 2026

   EBA guidelines on the management of ESG risks apply

   EBA/GL/2025/01
4. 11 January 2027

   The same guidelines apply to small and non-complex institutions, at the latest

   EBA/GL/2025/01
5. 10 July 2027

   Deadline for EBA's draft standard on what counts as a "comparable property"

   Article 229(4)
6. 31 December 2027

   Latest end of the transition: loans granted before 2025 move to property value

   Article 495f

What Article 229(1) requires

Two more sentences in the paragraph matter in practice. The valuation "shall take account of any prior claims on the property". And it shall "reflect, where applicable, the results of the monitoring required under Article 208(3)".

Point (b)(ii) is the one with no method attached. The regulation does not say how to measure a "sustainable" value, and Article 229 gives EBA a mandate on "comparable property" and none on this point. Each bank has to write its own approach down and defend it.

How the revaluation cap works on one flat

Take a flat financed in 2021 at a valuation of EUR 200,000. The bank has monitored it once a year since then, so it holds six values, in thousands of euros: 200 (2021), 210, 224, 236, 244 and 252 (2026). In 2026 the bank revalues the flat, and the current market value is EUR 252,000.

The bank recognizes EUR 24,333 less than the market value, 9.7 percent. For a loan of EUR 160,000 the loan-to-value ratio is 63.5 percent against the market value and 70.3 percent against the property value.

The capital effect follows from Article 125(1). Under the standardized approach, for a residential exposure that qualifies under Article 124, the part up to 55 percent of the property value gets a 20 percent risk weight; the rest is weighted as an unsecured exposure to the borrower. Here that secured part is EUR 125,217 (55 percent of 227,667) instead of EUR 138,600 (55 percent of 252,000), so EUR 13,383 more of the loan carries the borrower's risk weight.

Now let the market turn. A year later the market value is EUR 230,000. The last six observations are 210, 224, 236, 244, 252 and 230, an average of EUR 232,667. That is higher than the value at origination, so point (e) would allow EUR 232,667. Point (d) caps the value at the market value, so the property value is EUR 230,000.

A question submitted to EBA in 2026 asked whether the averaging could override the market-value ceiling. EBA rejected it (Q&A 2026_7809) because Article 229(1) "requires the valuation of immovable property to meet all the requirements set out therein". Both limits apply, and the lower one binds.

Edge cases in the text

Two edge cases come straight from the text:

• Too little history. "The property value shall not be revalued upward if institutions do not have sufficient data to calculate the average value." Fewer than three observations at equal intervals means no upward revaluation, unless the next point applies.
• Improvements. The value may exceed the average or the value at origination "in the case of modifications made to the property that unequivocally increase its value, such as improvements of the energy performance or improvements to the resilience, protection and adaptation to physical risks of the building or housing unit." A new roof, insulation or flood protection can lift the value above the cap; a hot market cannot.

Where the revaluation average comes from

Article 229(1) answers this itself: "For the purpose of calculating the average value, institutions may use the results of the monitoring of property values in accordance with Article 208(3)."

So the monitoring series a bank already keeps becomes the input to its capital figure. CRR3 also wrote into Article 208(3a) that monitoring may run on "advanced statistical or other mathematical methods" ("models") under six conditions (our guide to [Article 208(3a) and EBA Section 7.4](/guides/can-banks-use-avm-crr3) goes through each).

Three practical consequences follow:

1. 1

   The interval is fixed by the series

   The average is taken "across property values observed at equal intervals". A bank that monitors residential collateral only once every three years, the minimum in Article 208(3)(a), has at most three points in a six-year window, which is the minimum the rule allows. Monitoring once a year gives six or seven points.

2. 2

   "For that property, or for a comparable property."

   The text lets the average be measured on a comparable property instead of the property itself. EBA must propose by 10 July 2027 what makes a property comparable (Article 229(4)). Until then, banks define it in their own policies.

3. 3

   The model's quality becomes a capital question

   An index that is too coarse, or a model that misses a renovated building, moves the average and therefore the risk weight. Our guide to [collateral revaluation and indexation](/guides/collateral-revaluation-indexation-crr3) covers the choice between an index and a property-level model.

Loans granted before CRR3 applied

Article 495f is a transition rule. For exposures granted before 1 January 2025, banks "may continue to value residential property or commercial immovable property at or less than the market value", or at mortgage lending value where national law sets rigorous criteria for it, "until a review of the property value is required in accordance with Article 208(3), or 31 December 2027, whichever is earlier."

The derogation covers points (a) to (d) of Article 229(1). It leaves out point (e), the revaluation cap.

Covered bonds

The covered bond article (Article 129(3)) gained a subparagraph under which the authorities designated under Article 18(2) of Directive (EU) 2019/2162 "may allow that property to be valued at or at less than the market value", or at mortgage lending value, "without applying the limits set out in Article 229(1), point (e)". Recital 19 gives the reason, to "avoid unintended consequences for the functioning of the covered bond markets". Whether a cover pool uses that option is a national decision.

ESG and the review trigger

CRR3 also rewrote the review trigger in Article 208(3)(b). A valuer must review the valuation when information "indicates that the property value may have declined materially relative to general market prices", and "ESG-related considerations ... shall be considered to be an indication that the property value might have declined materially". Flood exposure or a poor energy rating can now count as such an indication.

EBA's guidelines on the management of ESG risks (EBA/GL/2025/01) apply from 11 January 2026, and from 11 January 2027 at the latest for small and non-complex institutions.

What is still open

• "Comparable property". EBA's draft regulatory technical standard is due by 10 July 2027.
• The sustainable value adjustment in point (b)(ii). The regulation prescribes no method, and Article 229 gives EBA no mandate on it.
• How national supervisors read the transition. Article 495f ends on 31 December 2027 at the latest; a review required earlier under Article 208(3) ends it sooner for that loan.

What this means for a bank's data

• Keep a value per collateral property at equal intervals, in addition to the values at origination and at each formal review.
• Keep the value at origination as a separate field that is never overwritten, because point (e) compares against it.
• Record why a value went above the cap (the modification, its date, its evidence).
• Store the market value next to the property value, because point (d) caps the property value at each revaluation.
• Keep the method for point (b)(ii) in writing, with the figures it produced.

Where Bytero Engine fits

Bytero Engine returns a market value for one flat at a time, and in the Bytero app each value comes with its inputs and comparables. Bytero Live adds an asking price index by region with monthly steps. Both can feed a monitoring series. Point (a) of Article 229(1) requires an independent valuer, so a model output alone does not make a property value, and the bank remains responsible for the method.