BNR agrees to less restrictive conditions for mortgages

As of January, Romanians are free to access mortgages for which they offer collateral of homes and in town plots of land with a maximum degree of indebtedness of 60-65 percent, provided they make a down payment of at least 10 percent. This is the first decision on less restrictive lending in 2009, insistently requested by bankers, and approved yesterday by the National Bank of Romania (BNR).

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.

Business Standard