Romanian Govt Mulls Reducing Guarantee For New Home Loans To 50%

At the moment, the state guarantees 100% of the loans contracted through the program.

Prime Minister Emil Boc argued that sharing the guarantee risk between the state and banks will double the total ceiling available to the program, currently EUR1.5 billion, as well as the number of beneficiaries. He expects the banks to agree to the idea, since only 21 of the 37,000 loan contracts signed through this program so far have repayment problems.

Technical discussions on the issue should be completed within one week.

In January, the Government decided the "First Home" program will continue this year with a state guarantee ceiling of EUR200 million, which might be increased in July for the second half of 2011. Half of this amount has already been used.

The second stage of the "First Home" program, launched in early 2010, saw the state guarantee loans for the purchase of a new home up to EUR60,000, in the case of older buildings or buildings under construction, and EUR70,000, in the case of planned buildings. Buyers organized into associations were eligible for state guarantees of up to EUR75,000.

"First Home" loans in local currency have an interest rate calculated as three-month ROBOR plus up to 2.5 points, while those in euro use EURIBOR as reference, plus up to 4% per year.

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