Mortgage lending at the end of last year exceeded the 8 billion RON (2.36 billion euro) mark, following a 53% rise against December 2005.
Last year, mortgage lending expanded at a much slower rate than consumer lending, a result, which is in opposition to what bankers expected. In fact mortgage lending only witnessed a small acceleration with the annual growth rate advancing, in real terms, to almost 46% in December 2006 compared with 44% in December 2005. In nominal terms, last year’s expansion was much narrower than figures for 2005.
The dynamics was however, influenced by a larger basis for comparison. In absolute volume, lending increased by almost 2.8 billion RON, from 1.9 billion RON. Mortgage lending considerably decelerated in the last quarter of 2006, in line with the overall dynamics of non-governmental lending, which moved more slowly amid NBR’s restrictive monetary policy. In December, mortgage lending climbed by only 2.5% against almost 4% in the previous month and 7% in September.
Despite bankers’ stating in spring that they were witnessing the end of the consumer lending boom, with mortgage lending expected to overtake it, figures from December indicate a reverse in dynamics. Consumer finance kept up its assertive growth pace (almost 94%) and therefore continued to consolidate its position in the structure of loans contracted by the population – accounting for almost 80%. However, bankers still maintain a positive attitude towards the development of mortgage lending, considering that it accounts for the bulk of the financing contracted by the population on the mature markets.
In fact, several banks as early as the beginning of the year announced significant interest rate cuts for mortgage loans, in a bid to gain a bigger piece of a market they see as generating strong growth. The slower expansion of mortgage lending was also triggered by NBR’s regulations on foreign currency financing, considering most mortgage loans are denominated in foreign currency. On the other hand, a large part of the loans that encouraged real estate investment were logged, with the NBR, as consumer loans; as the central bank also includes home equity loans in this category.
At the end of December, the volume of RON mortgage loans stood at 1.24bn RON (368m euros), while foreign currency financing amounted to 6.78 billion RON (2 billion euros).
Banks managed to resume strong foreign currency lending as late as the second half of last year, after taking steps to offset NBR’s restrictions.
In December, mortgage lending advanced at a far slower pace.
At the end of 2006, RON lending posted an annual growth rate of 114%, from 62% in December 2005. The growth rate has considerably gone down in the last few months, from a peak of 178% that was reached last July. Foreign currency lending last year rose by a little more than 45% (for a volume calculated in RON), against 57% in 2005.
Mortgage lending
Much slower to progress than consumer lending
Registered a noticeable slowdown in the last quarter of last year
In December climbed by only 2.5% against 4% in the previous month
The slower dynamics were also triggered by NBR’s restrictions
At the end of December, the volume of RON-denominated mortgage loans stood at 1.24bn RON (368m euros), while foreign currency financing amounted to 6.78bn RON (2bn euros)