BCR: Romania's new mortgage loans law will eliminate the First House program
The new law on mortgage loans will lead to the disappearance of the state-supported First House (Prima Casa) mortgage lending program, according to an analysis by BCR, the biggest Romanian lender.
The state’s guarantee for the First House program will become null, due to this law. Moreover, local banks will adopt extra cautious measures to reduce the credit risk. The advance payment for mortgage loans will grow from a current average of 15% to 30% in the future.
Some 160,000 people who are now eligible to get mortgage loans will no longer be able to do this, because they will not afford to come up with the higher advance payment. They will need some extra eight years to save for an advance payment, according to the BCR analysts.
The number of eligible customers for mortgage loans will fall by 60% in the next 5 years, from 270,000 to 110,000, BCR estimates. This will also lead to a contraction of the real estate financings granted by local banks from an estimated RON 50 billion to RON 15 billion in the same period, which will also severely impact the residential real estate market.
The law on giving in payment, initiated by the MP Daniel Zamfir, allows the mortgage debtors to get rid of their debts to banks by giving the mortgaged assets to the banks. Local banks have already reacted to this law and became more cautious in financing real estate acquisitions.