http://www.bloomberg.com/news/2014-02-02/romanians-reject-euro-loans-after-hungary-disaster-mortgages.html
Romania, European Union's second poorest country and also one of the most affected by the economic crisis has been using record- low interest rates to rebuild its housing market. It has been forcing home buyers to abandon cheap euro- denominated mortgages.
The government has been giving $4.2 billion in loan guarantee to first time home buyers. The government expects that the borrowers will accept higher payments in exchange for local currency loans that wont increase the costs if leu (Romanian currency) plunges against the euro.
The government changed this four year old program for euro loans last October. This new program for euro loans covers credit only in leu. This change was brought about after seeing how Hungary(neighboring country) was affected by buying Swiss franc loans and had to end up paying a lot more in their own currency. The forint(Hungarian currency) has been depreciated by about 75% since 2008, when most of the loans were issued.
The Romanian plan guarantees 50% of the value mortgages with a 5% down payment. This will reduce the risks of the banks and will thus be able to give out cheaper loans. The Romanian Central Bank also reduced its interest rate to a 3.75%, one of the various government cuts. This program will protect Romanian citizens from the exchange rates.
Romania, European Union's second poorest country and also one of the most affected by the economic crisis has been using record- low interest rates to rebuild its housing market. It has been forcing home buyers to abandon cheap euro- denominated mortgages.
The government has been giving $4.2 billion in loan guarantee to first time home buyers. The government expects that the borrowers will accept higher payments in exchange for local currency loans that wont increase the costs if leu (Romanian currency) plunges against the euro.
The government changed this four year old program for euro loans last October. This new program for euro loans covers credit only in leu. This change was brought about after seeing how Hungary(neighboring country) was affected by buying Swiss franc loans and had to end up paying a lot more in their own currency. The forint(Hungarian currency) has been depreciated by about 75% since 2008, when most of the loans were issued.
The Romanian plan guarantees 50% of the value mortgages with a 5% down payment. This will reduce the risks of the banks and will thus be able to give out cheaper loans. The Romanian Central Bank also reduced its interest rate to a 3.75%, one of the various government cuts. This program will protect Romanian citizens from the exchange rates.
Romania's plan to rebuild its housing market seems to be working. Since changing the terms of the program for euro loans to only cover credit in the Romanian currency (leu), leu mortage lending has skyrocketed. It grew at a record annual pace of 90% in December alone.
ReplyDeleteIt seems that leu mortgae lending will continue to increase, as ING Romania Chairman Misu Negritoiu said his bank applied to join this year. He has said he wants to tap as much as 50 million lei in state guarantees.