Over 80% of released mortgages are RON-denominated ones and in the case of consumer loans almost all applications are for RON loans. Nonetheless, foreign currency-denominated loans still make up two thirds of banks’ retail portfolios.
The stock of RON loans granted for house acquisition topped RON4 billion at the end of February, double the level of the same period of 2013, amid the stepped up sales in the past year half on the falling interest rates and the shift of the First Home scheme to lei.
At the same time, lei consumer loans halted their recent years’ decline, with new sales finally coming to cover clients’ reimbursements. The stock of lei consumer credits revolves around RON23 billion.
Bankers sold around 2,000 lei mortgages in each month of the past year-half, four-five times above the average of previous months, show ZF calculations based on the loan stock increase. Loans of around RON330 million were added in banks’ balance sheets in February alone, according to BNR data.
Instead, foreign currency loans for house purchasing lost around EUR170 million in volume from the peak reached last July. New sales are so low they no longer cover reimbursement and loans put out of balance sheets.
However, euro-denominated mortgages still account for over 90% in loans banks released for home acquisition, as the lei mortgage market was almost inexistent until recently. The stock of foreign currency loans stood at the equivalent of EUR8.3 billion in February.
A mass of lei mortgages started shaping up in the second half of last year, once the First Home scheme shifted to lei. On the segment of standard loans, clients also switched from euro to lei as well.
“Against last year, lei lending weighs much more in total sales. On the mortgage segment, around 80% of new sales are of lei loans. Over 60% of new loans also have a refunding component,” states Liviu Andrei, chief executive officer of Alliance Finance loan brokerage.
The period is good for refinancing as interest rates for lei personal loans dropped to around 10% per annum, from 20% per annum in 2009-2010. Interests went down as banks borrow cheaper from the interbanking market. Lei lending got cheaper amid the monetary easing cycle carried out by the BNR between July 2013-February 2014.
At the same time, foreign currency borrowing is no longer an option after the BNR two years ago tightened individuals’ access to euro or other foreign currency loans. Also, banks no longer hold bulky foreign currency resources as the parent banks cut their cheap credit lines.
Foreign currency consumer loans now revolve around the equivalent of EUR6.7 billion, with the volume having declined by almost 9% in the past year alone.
Lei lending could be also spurred by the changes to legislation for covered bonds, which authorities have long postpones, but which banks see as a long-term funding solution. The first issue of covered bonds is likely to take place toward the middle of the year.
Banks hold around 270,000 mortgages and almost 3 million consumer loans in their portfolios, according to Credit Bureau data. At the end of 2008, when the first crisis signals appeared domestically, Romanians had almost 5 million consumer loans. Many of them have been paid back and others were taken out of balance sheets as debtors no longer paid installments.
(English version by Catalina Apostoiu)