First results of giving in payment and the resettling of the market

First results of giving in payment and the resettling of the market

Banks show signs of wanting to adjust, at least in part, to the population's actual financial possibilities.

In the first two months of applying the recently approved law of giving in payment, statistics from the National Bank of Romania (NBR) show that approximately 4.000 clients appealed to it. This number accounts for 1% of customers having a mortgage. According to the Romanian Commercial Bank (RCB), 10% of the beneficiaries of the law (400 people) fit the profile of real estate investors, considering the fact that they want to give up at least two properties; requests for erasing companies' commercial debts have also been reported.

Once the law was adopted, at the end of April 2016, banks hurried to increase the minimum down payments for getting a loan for a house from the previously required 15% (for RON) up to a level of 30% or 35% (there were some that settled for less, but these were, however, exceptions to the rule). The First Home program was not affected by this decision, as it had been feared, because the Parliament had agreed to exclude it from the application of the law. 

After a sensible drop in demand for mortgage loans – outside the First Home program –, some banks lowered their expectations a bit, as a response to the potential customers' difficulties in coming up with such large sums of money. An example in this respect was given by RCB officials, who decided to lower the minimum down payment threshold for a house loan to a level of 25% – but only for the 20 largest cities of the country. The preferential approach is due to the fact that bigger real estate markets are more expensive, more dynamic and have a higher degree of liquidity compared to smaller ones.

However, the RCB feels this tendency of readjusting (in part) to the population's actual financial possibilities, it will not solve the problems created by the giving in payment – for banks in general, but also for the customers. “Down payments will be regulated, but this actually means a shorter reimbursement period or stricter income requirements”, the financial institution's officials say. On the whole, it is estimated that the mortgage growth rate will slow down significantly, contrary to the needs of the population.

Adriana Lefter – Imoland Expert Consulting