First contraction of mortgage lending after 17 months of growth

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Mortgage lending contracted in July, for the first time in the last year and a half, with its volume down 1.7%, to 4.8 billion euros, according to data from the National Bank of Romania (BNR).
Bankers were talking about a slowdown in mortgage lending as early as this summer, amid uncertainties concerning the real estate market. Many clients preferred to put off buying a home, amid signs of prices going down, especially for old apartments.
 
„Over the last few months, we have seen a stable trend, with retail lending up by around 110 million euros. We have not witnessed dramatic declines from month to month, however, sales are up to 20% lower than in the same time last year,” says Alin Merer, marketing manager of Volksbank, one of the players with an active presence on the market of real estate funding.
 
BNR statistics show that, with the exception of June, when the mortgage lending took a jump of 228.5 million euros, the monthly rates took a dive since last autumn.
In November last year loans made a record jump, of 286 million euros. But it slowed down month-by-month, dropping to 55.7 million euros in March. July marked another downturn of 86.8 million euros.
 
At the beginning of August, Dan Sandu, deputy director general of Millennium Bank, also pointed out a drastic decline in mortgage lending sales due to clients’ expectations of a price reduction on the real estate market. Albert Roggemans, retail head with ING, noted in his turn a slowdown in sales of mortgage lending.
 
The reduction of the July balance was prompted by the restricted foreign currency lending, but the dynamics is also influenced by the statistical effect of a lower exchange rate, under conditions in which BNR expressed in lei the balance of foreign currency lending. Mortgage lending is in general contracted in foreign currency, in the context in which the majority of prices on the real estate market are expressed in euro and the bankers encourage this alternative.
 
At the end of July, the mortgage lending contracted in foreign currency stood at 4.37 billion euros, accounting for almost 91% of the total. Compared to June the balance showed a drop of 2%, but this under conditions in which euro/leu exchange rate declined by 3%.
As such, expressed in euro, the balance variation indicates a marginal growth, of 0.6%.
 
Yet the variation in July is much smaller than the jump in June, when the foreign currency lending climbed 5%.
Mortgage lending in lei also stagnated in July, the balance remaining 444 million euros.
Lending sales, including on the real estate segment, will be affected starting with October by the enacting of BNR restrictive regulations.
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