BNR could give the green light for relaxed mortgages

Romanians could be granted mortgages based on more relaxed conditions as of this month, and could pay monthly interest rates amounting to as much as 60-65 percent of their income, according to sources within Romania's National Bank (BNR). This could be possible provided that debtors come up with housing units or land as collateral.

This is the first sign sent by BNR for a relaxation on lending, after the central bank issued harsher lending rules last fall, aimed at curbing consumption and lowering risks for both lenders and their clients.

The decision could be passed on Thursday, during the BNR Board of Directors meeting, and bankers could grant more relaxed loans as soon as the new regulation is published in the Official Gazette.

Each bank would be allowed to increase the degree of indebtedness depending on its lending history on this segment and the risk profile. The current maximum level of indebtedness is 30-55 percent depending on the bank and the client's income. "If you are good, you lend, if you are not, you stand by (...) It is possible that some banks are not doing well, so we will treat each lender accordingly," BNR sources told Business Standard.

"It is very likely that the rules will change this weed. Based on this change, we will be encouraging those with lower incomes," the sources added.

Easier lending could end the serious deadlock registered on the residential market in the past few months. Many potential buyers were forced to change their minds because they no longer had access to mortgages, which prompted several developers to freeze or cancel projects. Prices dropped last year by as much as 30 percent, in some cases, for old apartments.

Bankers repeatedly requested the central bank to relax the rules and ease lending, and to consider a different approach for mortgages and consumer loans.

Business Standard