Interest rates for "First House" program to stand 42 - 49% below the current market ratesPublish date: 15-06-2009
Persons interested in taking a loan through the "First House" ("Prima Casa") incentive program will pay interest rates on average 42 - 49 percent smaller than on the market right now, declared the Finance Minister Gheorghe Pogea at the end of the government meeting.
Prime minister Emil Boc explained the government will impose banks some conditions related to the margins practiced, so that banks granting mortgage loans through the "First House" program can apply a margin of maximum 4 percent per year over the EURIBOR interest rate at 3 months for credits in euros and a margin of 2.5 percent the most over the ROBOR rate at 3 months for credits in lei.
Thus, given the EURIBOR level of 1.28 percent on June 12, the annual interest rate for credits in euros will stand at maximum 5.28 percent, compared to 11 - 12 percent right now on the market, the premier explained.
It follows that the average cut of costs for a person through the "First House" program stands between 42 percent and 49 percent for credits in euros.
Boc explained that a person who wishes to take a mortgage loan of 50,000 euros for 25 years through the "First House" program will make a downpayment of 5 percent and will pay a maximum 41,000 euros in interest for the period, compared to 81,000 euros under the current market conditions.
Another advantage is that more persons can become eligible for the loan, following the cut of costs with interest rates and commissions. For instance, for a 50,000 euro home, the minim required monthly income for a loan on 25 years and a 5 percent downpayment would be around 595 euros per family, compared to 863 euros required now on the market, said Pogea.
The lenders that want to participate in the program will need to have a national coverage, added Boc. Moreover, they will not ask for any commissions for anticipated payback and will not unilaterally modify the lending contract.
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