Fewer mortgages were released in 2020 compared with 2019, but trend is kept

New mortgages to the value of 2.81 billion lei were provided in Moldova in 2020, a 13% decrease on 2019. The value of mortgages released by banks during the last three years trebled yet, to 7.88 billion lei at the end of 2020, constituting 17.3% of the portfolio of total bank loans, the National Bank of Moldova (NBM) has said in a response to an inquiry made by IPN.

According to the recent data of the International Monetary Fund, the value of mortgages in the portfolio of total loans varies depending on the country. In Romania, the figure stands at 25.5%, in Ukraine at 3.4%, in Armenia at 10.6%, in Georgia at 32.3%, in Poland at 28.1%, in Russia at 12.1% etc.

In Moldova, bank mortgages started to be more popular in 2018. Until then the value of released mortgages was rater low. At the end of 2017, this was 2.64 billion lei. The upward trend is kept – the demand for mortgages had grown relatively constantly during the last two years, except for the period when restrictions related to the COVID-19 pandemic were introduced. Later, the monthly volumes of the released new loans declined to almost the same value as in 2019, even if the total volume in 2020 didn’t reach the values for 2019, said the National Bank.

On the one hand, the mortgages provide important advantages: the dwellings become more accessible to the population and the development of particular areas is stimulated, primarily of the building sector. On the other hand, the excessive rise in the volume of released mortgages implies particular risks, such as the temporary rise in prices of real estate and appearance of speculative bubbles.

In case of excessive lending, the NBM can apply multiple instruments, depending on the type of the identified scenario, like the introduction of sector limits. For example, the volume of released new loans in a given sector must not exceed 15%. Such a measure allows to concentrate the correction effort on the area where particular risks are identified.

The average rate of nonperforming home loans in the banking sector was 3.2% at the end of 2020, rising in the course of the year from 2.6% at the start of the year. The average rate of total nonperforming loans in the sector was 7.4%, down from 8.5% at the start of 2020.

A number of 2,321 loans to the total value of 1.16 billion lei were provided in the framework of the “First House” Program in 2020. At the end of last year, the balance of loans released by the Moldovan banks within this program was 2.47 billion, which is 5.42% of the balance of total loans and 31.38% of the balance of mortgages.

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