"Romanians don't know how to live from one debt to another, like the Americans do and an over 30-year loan can burden the indebtedness of a customer a great deal for a very long period of time," Sorin Popa told ZF.
He believes a longer-maturity loan "is not natural", it is just the result of the attempt of a bank to lure customers at all costs.
"You must not expose the customer just for the sake of exposing them, giving them the wrong impression that they actually gain something momentarily because they successfully take out a loan, which includes use of misleading interests that only last for a few months. The client will be disappointed in the end," Popa says. The maximum maturity for a mortgage loan has been recently extended to 40 years by the Greek at ATE Bank, once they started applying their own lending norms endorsed by the NBR early in July.
At the same time, players like Banca Romaneasca, Bancpost, Banca Carpatica and MKB Romexterra Bank offer mortgage loans with maturities of up to 35 years, while most banks stick to a maximum of 30 years.
The extension of the maturity of a loan by 10 years can increase the cost the client has to bear by some 3% because of the interests and especially of the fees that just accumulate and have to be paid. A solution for a loan with such a long maturity can be to just refinance at some point.
Banks have resorted to the extension of the maturities as a marketing tool, which also was, until recently, one of the ways to disguise an increase in the indebtedness level of a customer while the caps set by the NBR were in force.
The situation remains the same as far as most banks are concerned, considering that only five players received approval from the central bank to grant loans using their own norms, although six months have passed since the NBR introduced its new conditions for validating the individual norms.
On the other hand, the long credit periods offered to individual customers also make banks take greater risks, which may translate into larger reserves being set aside, considering the risks that may come up in 35 to 40 years, and the lack of a record of customer behaviour in case of such long-term loans.
Sorin Popa says a long-maturity loan also ends up subjecting the customer to a great deal of psychological pressure, considering the market is just maturing.
"Many customers cannot wait to repay their loans, because most of them are honest and pressure is created."
The extension of maturities undoubtedly remains the only way in most cases to facilitate the access of many customers to real estate loans, although it is obvious that this leads to a substantial increase in the total cost of the loan.