Creditcenter: A Slow Down In Mortgage Crediting In February

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Creditcenter: A Slow Down In Mortgage Crediting In February

February is traditionally a slow period for the banking system and this year was no exception. According to Creditcenter's monthly statistics, mortgage lending activity in February declined, which is quite natural after a dynamic 2007.

This can be explained with the current instability of global markets, which had an impact on some European banks, including Bulgarian lenders. After the January records, in February, the average credit size slipped from 46,800 to 39,054 euros. This is a 15% decline on a national level and a 32% slide for the capital city Sofia.

Credit applications are also down – by 20% versus 2007 Q4. Consumers in Europe were worried by rumors of a possible hike in interest rates in the US as a result of the credit crunch.

As an EU member country, Bulgaria was also hit by the world crisis – in January the leading banks announced intentions to raise interest rates. Two of them did that in February – the increases being of between 0.1 and 0.6 points for the different types of credits, and reaching 1% for some consumer loans. This put a psychological strain on consumers and many of those who had applied for a loan in December, preferred to wait and see how home prices will change in the upcoming months and how the banks will react.

Consumers are also worried about possible increases of interest rates on existing loans, which are generally higher than those for new clients. Analysts expect more credit institutions to announce interest hikes this month (by between 0.1 – 0.6 %).

Banks and stock markets around the world showed sings of stabilization during February's last week, however, its effect will not be felt in Bulgaria immediately.

Although credits in BGN are generally more expensive, last month we saw a change in the euro/leva proportion of loans in favor of the Bulgarian currency. This may be just a temporary feature, as we are looking at a relatively short period of time (the month had only 20 business days).

The size of the monthly installment continues to be the most important factor for Bulgarians when choosing a loan.

One fourth of all credits in February are for a period of 25+ years. The majority of loans are for a period of between 15 to 20 years.

CityAverage Credit Size EUREur/BGN% Proportion
Sofia4160464/36
Varna4217377/23
Burgas3099463/37
Plovdiv3725250/50
Stara Zagora3511160/40
Ruse2249750/50
Blagoevgrad3110059/41
Veliko Tarnovo2267860/30
Pleven3352051/49
Dobrich2630042/58
Kardjali2530037/63
Sliven2385054/46
Yambol2754066/33

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