BNR agrees to less restrictive conditions for mortgages

Bankers are preparing to grant mortgages with a minimum down payment of 20-25 percent of the value of the home, said Radu Gratian Ghetea, Chairman of the Romanian Banking Association (ARB), while lenders are expected to finalize the new regulations in about one week.

In spite of this decision, bankers are skeptical, considering that less than a fourth of the 42 banks in the system are expected to modify their lending conditions. This because mother companies halted financing these banks, and because the new conditions will apply differently for each bank, depending on poor performing loans these have in their portfolios. “Some banks have announced they wish to maintain the degree of indebtedness based on the existing regulation. Once this is modified, banks send the regulation to BNR for approval and if this is too optimistic, we send it back. We hope to give them a response in two-three days from receiving theirs,” said Nicolae Cinteza, Head of the Supervisory Division of the central bank. Cinteza excludes the possibility of a zero down payment on mortgages, which could only be applied if loans are guaranteed with an additional deposit.

However, BNR’s decision to limit the effects of the international crisis on the Romanian economy, considering the acute lack of funds, could boost the real estate market.

BNR officials indicated that banks can compute “a higher degree of indebtedness for loan applicants, if they provide good quality real estate properties as collateral for the loans. However, the evolution of lending depends mainly on the capacity of banks to mobilize financial resources. The degree of indebtedness could be raised differently for each bank, depending on the loan history on this segment, from the current level of 30-55 percent.

Ionut Dumitru, Chief Analyst of Raiffeisen Bank, said that the most important factor in the slowdown of lending is without a doubt the reduction of the availability of foreign financing and its substantial higher price.

The growth rate of the non-governmental loan fell to 38.3 percent in November, and to 44.8 percent in October compared to similar months of 2007. Analysts forecast an annual growth pace of 15-20 percent for the end of 2009.

Yesterday’s decision will modify Regulation no. 11/2008, published at the end of August in Romania’s Official Gazette, and put into effect by banks as of October 2008, by which BNR harshened the conditions included in BNR Regulation no. 3/2007, regarding the limiting of the loan risk on loans for individuals.