FRANKFURT, (Reuters) – Germany and Austria need to curb a surge in home prices by imposing caps on mortgages and forcing banks into building up capital. This was the recommendation of Friday’s Financial Stability Watchdog from the European Union.

Although the recommendations of The European Systemic Risk Board were published Friday, they date back to December and were intended to accelerate action from authorities in both countries.

The ESRB stated that Germany and Austria had received ESRB warnings already in 2016, and 2019 respectively, but their vulnerabilities are still not adequately addressed.

The ESRB specifically wants Berlin to impose restrictions on the maximum amount that property buyers are allowed to borrow, in proportion to both their income and the price of the property.

Christian Lindner (German Finance Minister) resisted the proposal to introduce a loan-to value ratio for homebuyers. In a letter published Friday to the ESRB, he stated that banks are expected to be prudent.

The ESRB recommended that the authorities also order banks to construct capital cushions in order to absorb potential losses. This is called a countercyclical buffer, and a sectoral systematic risk buffer for residential loans.

BaFin, Germany’s financial watchdog introduced a buffer of 0.75 percent to countercyclical risks and recommended that a cushion of 2% be added for residential mortgages.

Austrian counterpart to it said Friday it would tighten its controls after finding that over half of all new mortgages were not compliant with the standards.

They include a minimum down payment of 20% and servicing costs that do not exceed 40% of the household’s income. The maximum term is 30 years.

Gottfried Haber, Austria’s deputy governor and central bank vice-governor, stated to reporters that “we don’t have a property bubble which is about burst.”

We have high prices growth, high lending growth, and systemic risks which have increased over the past months. This is why we need to address them proactively.

EU regulations require countries that have received ESRB recommendation to “act or explain why” they didn’t do so. The watchdog can’t issue sanctions.

The ESRB’s action comes just as the European Central Bank ends its huge bond purchases. However, it is widely believed that they will raise their interest rate following years of intensive stimulus.

High borrowing costs and runaway property prices have been fueled by ultra-low interest rates in the richer countries of the euro zone, particularly large cities.