Real estate loans are getting cheaper. Are they also easier to get?

Bankers are starting to cut interests on loans; the problem for those who want to borrow money to buy a home, however, are the much more conservative evaluations done by banks.

Whereas banks would agree to finance the purchase of a home with as much as 100% last year, now the value of the guarantee has to amount to at least 120% of the borrowed sum. In some cases bankers are even asking that the value of the home should be double the value of the loan, which means the customer should come up with half of the money. “In case of long-term loans with low down payments, pledging the asset you buy as collateral is not enough,” says Lucian Cojocaru, BRD-SocGen network trade point executive manager. He says that guarantees are ‘carefully’ reviewed given that in the absence of real estate transactions, clear price references are hard to establish. In the lending guidelines approved, NBR required banks to request clients at least 15% down payment of the value of the building acquired. “The banks’ policy is starting to distinguish among various types of assets and client categories. The situation is completely different than the previous approaches when the loan/collateral value ratio was identical for every product category,” says Sorin Mititelu, head of BCR’s retail products and business development department. Since the beginning of this year, banks have had to set the interest for retail loans either in line with an independent indicator (to which they add a fixed margin) or use a fixed interest for the entire duration of the loan contract. Considering all indicators of the monetary markets for euros and RON have gone down since last autumn, the loan cost is now lower. Raiffeisen has recently announced an interest rate cut for new loans in RON and euros by up to four percent, while ING cut one       quarter of a percentage point from the cost of real estate loans in euros. Banca Transilvania announced cuts by as much as two percent of the interests on RON loans in March.