State-guaranteed loans granted through the “First Home” program exceeded EUR800 million, which shows that bankers managed to sell very few products from their own offer. State guarantees supported mortgage loans during the crisis period, with the volume of loans climbing 50% in the past three years.
“One of the advantages of the First home program has been the 5% downpayment, hence its success,” says Adrian Jantea, promotion and distribution manager within BRD.
Loans sold through “First home” have a minimum 5% downpayment, three or four times less than a traditional mortgage loan. Moreover, bankers can no longer sell loans in their own offer with a downpayment of less than 25%, which will increase the attractiveness of the government program even more.
First home loans exceeded EUR800 million last year. Since the start of the program in June 2009, over 55,000 loans with a cumulated value of EUR2.3 billion have been granted.
At the end of September there were 218,000 ongoing mortgage loans, 60,000 accounts more than in December 2008, when the effects of the crisis were starting to be felt on the Romanian market.
Bankers continue to expect loans guaranteed by the state to be preferred by clients because banks will no longer be able to sell classical foreign currency loans with a downpayment of less than 25% as of this month. But the new restrictions imposed by the central bank don’t apply to the “First home” program, where the downpayment remains 5%.
“Because of the new regulations, in a first phase we expect a reduction in demand for classical real estate loans, with the main reason being the size of the downpayment, which for foreign currency loans is quite high,” Jantea said.
An alternative for clients could be leu-denominated loans, where the minimum downpayment imposed by the central bank is 15%. But clients have not been very willing so far to borrow long term in lei because of the very high interest rates, with less than 5% of the overall loans being in lei. Euro interest rates on mortgage loans exceed 6% a year, while interest rates on leu-denominated loans are over 9% a year.
(English version by Daniela Stoican)