Banks have cut interests on standard loans to around 5% since late last year, in a bid to boost retail lending, but differences between standard loans and “First Home” loans narrowed with this spring’s promotional offers.
“Only those who cannot afford the down-payment resort to the ‘First Home’ scheme, considering that it is harder to obtain, more documents are required and the approval period is longer than for a standard loan. But there still are applications for state-guaranteed loans,” says Liviu Andrei, executive manager of credit broker Alliance Finance.
The interest rate margin on euro-denominated loans granted through the “First Home” scheme has remained at 4% since the start of the scheme, although three-month Euribor, the index to which state-guaranteed mortgage loans are tied, has doubled in the meantime, to nearly 1.5% a year.
So, from 4.7% in the fall of 2009, the nominal interest rate on a “First Home” loan has climbed to 5.5% now. On the other hand, banks have lately significantly cut interest rate margins on their own mortgage lending products.
At BCR, the installment on a standard loan is around EUR20 higher than for a “First Home” loan (the same amount is considered), and the down payment is 15% of the property’s value. The difference is minor for a client who can afford to pay a higher down payment, considering the much more complicated approval process entailed by the “First Home” scheme.
Alongside CEC, BRD and Millennium have also come up with a down payment of just 10% for their alternative offers to “First Home”, while Raiffeisen and Bancpost sell mortgage loans with a 15% down payment.
So far, only BCR, CEC and Alpha Bank have announced they are now open to receive “First Home” applications, as part of “First Home 4”. They have an overall guarantee cap of EUR750 million.
Other banks which officially announced they would continue to be involved in the scheme include BRD, Banca Transilvania, Bancpost and Millennium, with a cumulated cap of over EUR450 million.