Mortgage loan celebrates 20 years in the Romanian market. Alpha Bank Romania was the first banking institution in the country to have launched, back in September 2001, Alpha Housing, the first mortgage loan that gave the Romanian people the possibility to buy a house without any other guarantees except the mortgage on the purchased property and without guarantors.
At that time, the loan was granted in US dollars, for a maximum period of 10 years, with a 30% down payment and was designed for buying or building a house, buying land for construction or renovating a house.
“Alpha Bank Romania launched the first mortgage loan that was intended for individuals and relied entirely on their ability to repay that loan. It was a foundation stone of the retail market in Romania, which, following that key moment, developed at a very fast pace. Over the last 20 years, our product range has been continuously developed and we have supported more than 45,000 Romanians to buy or build the home they wanted,” said the Executive President of Alpha Bank Romania and CEO of Alpha Bank International Network Sergiu Oprescu.
At the end of June 2021, Alpha Bank Romania’s mortgage portfolio exceeded RON 6.29 billion (EUR 1.28 billion).
The range of products has been constantly improved during this period, and now Alpha Bank Romania offers multiple solutions to Customers interested in buying or building a home, changing it for a larger one, buying land for construction or refinance their mortgage loans from another bank. The Bank offers a full range of mortgage products, including green financing solutions for those looking for a “green” home.
The “Prima Casa” (First House) government program, launched in 2009, has supported the recovery and expansion of mortgage loans, with Alpha Bank Romania being the second bank in the system to join the program.
Alpha Bank Romania continued its leading role in the housing loans sector and in 2019 launched the first covered bond program in the local market – an important moment, which enabled Romania to enter the European community of mortgage bond issuers and investors. Thus, Alpha Bank Romania marked a new premiere in the local market and covered the entire array of the mortgage market, introducing the first loan of this type in 2001.
The outstanding quality of Alpha Bank Romania mortgage portfolio and the status of expertise in this area were also recognized by Moody’s Investor Services rating agency which in April 2021 upgraded Alpha Bank Romania’s Covered Bonds rating by two notches to A3, one of the highest ratings issued by Moody’s for the Romanian market.
Moreover, Alpha Bank Romania is member of the Romanian Green Building Council (RoGBC) since 2018, and in November 2020 became the 66th lending institution to join the Energy Efficient Mortgage Initiative.
Credit growth engine for the market
At market level, the balance of mortgage loans reached RON 94.28 billion (EUR 19.14 billion) at the end of June 2021, and the number of active mortgage loans exceeded 540,000, according to Credit Bureau data.
Over time, mortgage lending conditions have been relaxed by extending the loan period to 35 years and reducing the minimum down payment, with the stock of mortgages growing steadily since its launch. The expansion of housing loans continued to accelerate after 2008, with an average annual growth rate of more than 10% in the post-crisis period, the mortgage portfolio growth being supported by the “Prima Casa” program.
“In 2009 and again between 2012 and 2016, mortgages were the only engine of the non-government credit growth. In the remaining years, except for 2011 and 2018, housing loans expansion was the source of at least half of the increase in non-government credit,” Sergiu Oprescu stated.
Regarding the currency in which Romanians borrowed during this period, the share of mortgage loans in RON in total mortgage loans increased from 10% in December 2007 to 79% in July 2021. The increase is due to the change in the legislative framework and the significant decrease in interest rates on loans in RON starting with 2014.
In terms of repayment of these loans, the non-performing loan ratio in the mortgage segment is very low at 1.68% (at the end of March 2021).
Romania ranks first in the EU in terms of owner occupation rate, with almost 96% of Romanians owning the properties they live in, compared to the European average of 69.9%. However, we are left behind when it comes to total outstanding of mortgage loans to GDP ratio, with 8.4% in 2020 (up from 3.3% in 2007), much less than in the Czech Republic (25.4%), Poland (21.3%) or the Euro area (42%).