A recent impact study by Banca Comerciala Romana (BCR) looking at the effects of the “passing to pay” law shows that some 60 percent of the bank’s clients will be unable to raise the money for the down payment, while the period required to save the money is expected to extend by eight years.
The “passing to pay” law enables discharge of mortgage-backed debts through transfer of the property title to the creditor. This, according to the bank, will lead to the Prima Casa program to be eliminated, as the State guarantee becomes null.
Furthermore, the law will push creditors to increase the mortgage down payment from the 15 percent required in the present to 30 percent, “a level considered prudent to ensure reimbursement without risk of a credit made up of deposits from customers,” the study shows.
This will lead to an inevitable impossibility to raise the money for a large number of the bank’s clients, according to BCR analysts. “The number of eligible customers will be reduced by 60 percent over the next 5 years, from 270,000 to 110,000 customers,” the press release states.
As such, the volume of real estate credits awarded by banks are expected to drop within the next five years from RON 50 billion to some RON 15 billion.
The down payment increase will lead to families needing a longer time to collect the sum, BCR estimating an extra eight years being necessary. This takes the average age of a first mortgage from 34 to 42, lowering life standards and possibly family life.
BCR analysts warn that the “passing to pay” law could make way for property speculators taking advantage of the expected drop in real estate prices and the option to give back the property to the bank should it not turn the expected profit.
BCR, part of Erste Group, is the biggest lender in Romania by assets (EUR 14.4 billion).