National Bank of Romania (BNR) decided on Wednesday to limit the level of indebtedness for the loans granted to individuals, for both mortgage and consumer loans, which is a premiere after 2007.
According to the new regulations, the maximum level of indebtedness will be 40% of the net income for the loans in RON and 20% for the loans in a foreign currency, BNR mentions in a press release.
The total level of indebtedness is calculated as a weighted average of the total monthly payment obligations related to the monthly net income. The maximum indebtedness rate is increased by 5% for the loans granted for purchasing the first home to be occupied by the borrower. The regulation is applied to both the banking institutions and to the NBFIs and will enter into force on January 1, 2019.
The Central Bank underlines that similar measures have been already adopted in other countries such as Hungary, Poland, Estonia, Lithuania, Czech Republic.
According to BNR, the main objectives pursued by this regulation are:
To simplify the access to loans for individuals and consolidate the sustainable growth of lending. According to the new calculation methodology, the level of the loan and the corresponding rates will be easily established by any applicant.
To protect the people with average incomes and with incomes below the average values, namely to improve the payment capacity, for a healthy lending.
Anyone who wants a loan, can calculate the monthly amount he can pay as a rate to banks and NBFIs, according to BNR.
What happens to the loan applications submitted and not solved yet? All the loan applications submitted before January 1, 2019, including those corresponding to governmental programs dedicated to customers who are individuals, such as the First Home program, will be solved based on the regulation in force at the time when they were submitted at the bank, even if the loan will be granted after January 1, 2019, BNR explains.
Another question which probably many Romanians who already have loans have in mind is: will it be possible anymore to refinance a loan? NBR mentions that all the loans granted exclusively to reimburse the debts corresponding to the loans contracted before the entry into force of the draft regulation are excepted from the new requirements on the level of indebtedness. However, this is not available for the refinancing which involves granting an additional loan to the existing one(s).
The Central Bank also explained that the estimated impact of the new regulation is insignificant on the economic growth.
The first time when BNR introduced explicit limitations of the level of indebtedness was in 2004, when the threshold was 30% for the consumer loans and 35% for the real estate loans, as well as a minimum level of 25% for the advance related to the real estate loans.
In March 2007, BNR eliminated the explicit limits of the level of indebtedness and of the advance, which were going to be established by each bank under the risk regulations, and later it justified that the measure was necessary as a result of the EU membership.