"First Home": Bankers and developers not optimistic

Publish date: 15-06-2009
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Prime Minister Emil Boc and President Traian Basescu asked bankers to limit interest rates for mortgages for the "First Home" program to 5 percent for euro-denominated loans and some 12.7 percent for loans in lei.

This program is part of an effort by authorities to revive the real estate market, hit by the crisis, through the acquisition of homes guaranteed by the state. However, bankers and real estate players are not very optimistic regarding the success of this program. People who contract a mortgage through the "First Home" program will pay a 5 percent down payment for an apartment worth up to €60,000, the amount guaranteed by the government within this program.

If the price of the home exceeds that threshold, the down payment will be €3,000, plus the difference between the price and the guaranteed amount, according to the program application norms, approved by the government yesterday.

The interest rate will be calculated based on the three-month EURIBOR index, plus up to 4 percent per year, for euro-denominated loans, and the ROBOR index, plus up to 2.5 percent for loans in lei, lower than the average interest on the market. Bankers say that the government could have obtained even lower interest rates, but that this will have no impact on the eligibility of clients for such loans, given that the required revenues are still significantly above the average, at RON 3,000-4,000 (€700-950).

However, the President of the National Loan Guarantee Fund for Small and Medium-Sized Enterprises (FNGCIMM), Aurel Saramet, said that lowering interest rates will increase degree of accessibility of future clients by some 15-20 percent, as far as eligible revenues are concerned.

President Traian Basescu said that the interest rate for euro loans should not exceed 5 percent. "The Romanian banking system presently has a significant surplus of financing resources and, at the same time, very high interest rates," he said. "Banks that wish to place their money in this program with a 5 percent interest rate are welcome, because this is an investment that is 100 percent guaranteed by the state," Basescu added. For lei-denominated loans, the three-month ROBOR rate amounts to 10.54 percent.

Business Standard

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