Romanian Bks May Accept Higher Indebtedness Degree At Mortgage Lending – Ctrl Bk

The central bank’s Managing Board eliminated the stress tests used for mortgage and real estate applications, but kept the stipulation that the borrower’s revenues’ should be accepted only in a margin of +/- 20% from its past year’s revenues according to its fiscal draft.

 

Moreover, the central bank decided that lenders should stipulate a minimum advance paid by the client when taking mortgage loans.

 

The new lending regulations will be valid only after being approved by the management of each bank. The new norms should afterwards be submitted to the central bank for approval.

 

According to the current regulation, the banks will calculate a debt degree for household lending based on revenues that do not exceed by more than 20% the ones declared to the Fiscal Authority in the previous year.

 

Also, the maximum monthly rate an individual can afford to pay for a loan will not be changed until the loan matures, according to regulation.

 

In order to find the maximum indebtedness degree, the banks have to apply a stress test, by taking into account the foreign exchange risk, interest rate risks, along with possible cost increases due to fees and other costs included in the loan contract.

 

For banks that don’t have their own lending norms, the debt ceiling will be lowered to 35% from a previous 40% of the client’s income.

 

As a result of the new norms, household indebtedness degree has significantly decreased, bankers said.

 

They asked the central bank to amend the household lending rules, as they have blocked mortgage lending.

 

Romanian private lending rose 38.3% on the year in November in real terms to 195.131 billion lei (EUR1=RON4.2764), and increased by 0.7% in real terms on a monthly basis, according to the central bank data.

 

The private lending growth rhythm slowed down in November, from 44.8% (or 38.4% in real terms) on the year in October.

 

The annual private lending growth in November was driven by a 29% (20.9% in real terms) increase in local currency lending and a 46.5% increase in foreign currency lending.

 

Analysts predict a lending decrease also in December.