Consumer loans secured by a mortgage accounted for 22% of overall loans taken out by individuals, that is 4.5 billion euros, according to the Financial Stability Report published by the NBR.
With this volume, the consumer loans secured by a mortgage (home equity loans as bankers call them) exceeded traditional mortgage loans taken out by individuals, which totalled 3.9 billion euros last December.
This is the first time NBR has ever published the volume of home equity loans, which it normally includes in the consumer loan category without distinguishing between the types in this category.
"The over 20,000 RON loans secured by a mortgage are taking off, and account for 42% of the individuals' loans between December 2006 and December 2007 compared with 33.6%. The expansion of such loans was mainly because of the home equity loans that went up by 159% in 2007, accounting for 22% of the individuals' loans last December," the Financial Stability Report reads. NBR analysts note that usage of the home equity loans is not clearly quantifiable, and fuels the coverage of consumption needs, the down payments or even the acquisition of homes or plots of land.
"We are still seeing demand for such loans. At the same time we, as a bank, are interested in having the loan covered by solid collateral. Given that most of the people own the place they live in, I believe there is a significant growth potential for such loans," said Mihai Bogza, chairman of Bancpost's Board of Directors.
Bankers say that such loans are generally used to finance real estate investments. Sergiu Oprescu, chief executive of Alpha Bank has recently explained that as far as portfolio quality is concerned, home equity loans are similar to traditional mortgage loans. Most bankers do not distinguish between the two.
After all, even NBR's report shows that people having taken out a home equity loan rarely fall behind with payments. On the other hand, NBR notes there is a growing trend of granting loans without any real guarantees, as a result of a higher appetite for risk on the part of banks caught in the battle for market shares.
"The unsecured loans in excess of 20,000 RON have increased a great deal, by eight times in 2007 compared with 2006. Unsecured loans are promoted in various ways - consumer loans, credit cards, overdrafts, and register the highest overdue amounts and implicitly pose the highest risk," NBR analysts explain.
The breakdown of overdue debt of individuals shows that overdue RON debt accounts for about 85%, while RON loans taken out account for 45% of the total.
The difference is due to the fact that most consumer loans are taken out in RON, while most mortgage loans (where people rarely fall behind with their payments) are taken out in a foreign currency.
Pentru alte știri, analize, articole și informații din business în timp real urmărește Ziarul Financiar pe WhatsApp Channels
