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Romanian mortgage market set to expand
The National Bank of Romania is expected to approve the offering of 100% loan to value (LTV) mortgages by 15 lenders, following its recent approval of the first 100% mortgage offering, by ‘Alpha’ bank. Up until this approval, Romanians could only borrow up to 90% LTV, therefore the real estate market in Romania should see a marked uplift in demand from local purchasers with access to increased credit.
Experts are predicting that Romania’s mortgage market will expand rapidly once these latest approvals have taken place. This expansion is good news for the consumer, as an increase in competition among lenders could potentially lead to lower mortgage rates as providers look to become the market leader.
Following on from this, the real estate market as a whole in Romania should feel a positive effect. The increased local demand brought about by the existence of 100% mortgages will meet a limited supply. Romania does not have the oversupply of property that has begun to blight some of the emerging markets. The planning process in the country can be a drawn out affair, which is one of the factors limiting supply at the current time. The basic laws of supply and demand should dictate a growth in property prices in the country as a consequence of this.
Poland bore witness to an expanding mortgage market and has experienced the ramifications. Prior to Poland’s EU accession, borrowing was only 2.5% of its GDP whereas by 2006 this had risen to 7.4%, indicating the sudden liquidity of the market following increased lending. Poland also saw a reduction of mortgage rates following the introduction of 100% LTV mortgages, just as is predicted for Romania.
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