Banks prepare harsher lending conditions

Bankers have taken notice of the price decline on the real estate market and are expecting the trend to continue at least by yearend, so they are preparing harsher lending requirements, reveals a survey conducted by the NBR (National Bank of Romania). The banks’ expectations for the fourth quarter in terms of lending standards signal a major toughening, especially for mortgage lending, which could result in a slowdown of the growth rate of funding for the population, shows the NBR survey. According to the banks, housing prices have already seen a decline the third quarter, with further price declines expected in the fourth quarter. Corporate lending requirements toughened at a faster pace in the third quarter than in the previous two quarters of 2008, with the main factor being expectations as to the value of guarantees pledged, and mortgage credits proving the most affected. Costs of lending other than interest-related costs rose higher than in the previous quarters of 2008, with this being the second factor that led to tougher lending requirements applied to the contracts. The premium asked for riskier credits went up five times compared with the beginning of the year continuing the trend it had seen in the previous three quarters, also a major factor to the toughening of lending requirements.