Demand for mortgages down 50%

The demand for mortgages dropped by more than 50 percent in the first quarter of 2009, compared to mid-2008, and lenders are giving the go-ahead for an even smaller percentage. While mortgage growth exceeded an annual 60 percent in 2008, new loans are no longer covering for monthly reimbursements.

The engine fueling the decline includes housing prices, increased uncertainty due to the global crisis, and high financing costs for loans as the leu has lost more than 20 percent to the euro. Some banks, such as Volksbank, the third-largest lender locally, with 95 percent exposure on the real estate segment, are not granting any mortgages at this time.

Others are still lending funds for housing, but based on stricter conditions. "We are still granting mortgages and supporting real estate developments. Of course, criteria is stricter. A depreciation of the loan portfolio quality is visible on all segments, but less in the mortgage field," the Executive President of UniCredit Tiriac Bank, Rasvan Radu, told Business Standard. RBS Romania is also granting mortgages and consumer loans "based on selection." "We granted more mortgages in February 2009 than in February 2008," according to RBS Romania's Country Head of Retail, Haris Hanif. Although the National Bank of Romania (BNR) relaxed lending conditions for housing, only a few lenders are willing to grant mortgages with the maximum indebtedness degree.

A study carried out by UniCredit Tiriac Bank shows that some 25 percent of people interviewed plan to borrow money from banks in the coming 10 years, but only 75 percent of them can afford a mortgage. The affordability index calculated by the bank dropped to 3.8, from 6.5 in 2007. "People's revenues dropped some 5-6 percent recently, and these will keep declining," the bank's Retail Manager, Zoltan Major, said. He added that demand for mortgages is to rise some 15 percent this year.

Business Standard