First home project interest rates range from 5.5-23%

Publish date: 04-06-2009
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Some 20 banks have applied for the First home project, with interest rates ranging from 5.5 percent to 14 percent for euro-denominated loans and from 13-23 percent for loans in lei, according to government sources, quoted by Mediafax news agency. Furthermore, Prime Minister Emil Boc announced that the interest rates will vary from bank to bank.

"Interest rates will be set after the legislation is finalized, based on what [information] banks have sent us. We will select the best conditions which are to be recorded in the government ordinance establishing the application norms," Boc said.

As of July, Romanians, who have never owned a home, will be able to acquire one through the government-initiated First home guarantee program. The home will be guaranteed for up to €60,000, regardless of its value, and the owner will pay a five percent value-added tax and enjoy some 30 percent discounts off notary fees.Sources said that, for euro loan offers, all interest rates are calculated based on the three, six or 12 month Euribor indicator, to which is added a fixed margin. Thus, effective annual interest rates are to vary from 5.5 percent to 14 percent. For lei-denominated loans, the interest rate will be established based on the ROBOR indicator, plus a fixed margin.

The banks providing the lower costs for euro loans are BRD-Societe Generale and Alpha Bank, while the best offer for lei loans comes from the state-owned CEC Bank. On the other hand, Raiffeisen Bank President, Steven van Groningen, said that interest rates for the First home project should be as low as possible, and that a reasonable level would be the interest rate the Romanian state pays when borrowing funds, plus one percentage point.

"The key to talks is the interest rate level. At high interest rates, fewer people will qualify," van Groningen said.

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