Eight out of ten Romanians resorted to promotions for taking credit

Considered till recently a market “of all possibilities”, the Romanian credit market is confronting with a change process that seems to completely shake it. Forced by the international financial crisis, and also by the new crediting rules adopted by the National Bank of Romania (Banca Nationala a Romaniei –BNR), the banking institutions seem that they don’t make efforts for attracting customers willing to take credits. Almost all the banks have dropped out to the famous promotions to loans, and the interests increase, justified or not, day by day.

Removing the credit promotions, once with implementing the new crediting norms, it means for most of the Romanians null chances for obtaining the needed credit. No matter if we speak about a personal need credit or of a mortgage one, the statistics show that eight out of ten Romanians resorted to a banking product with promotional interest for accessing the needed credit. The explanation is as simple as it can be: an interest smaller for the first 3, 6 or 12 months means a smaller rate which reported to the salary of the applicant (depending of the indebt level) finally directed to accessing a bigger loan. After stepping over the “honey” period, the customer realized that he had to support a monthly rate much bigger than he could afford it, but this wasn’t anymore the bank’s problem. In a first stage, both parts had to win, the customer received what he wanted and the bank granted credits on rolling band. However, later, the business remained profitable only for the credit institution. “Out of our data, about 80% of the applicants for credit have resorted to a product with fixed interest in the first period of the contract and variable ulterior. This type of interest assumed smaller costs at the beginning, due to the fact that the indebt level was applied to the fixed interest period, and the interest being smaller, the final loaned sum could be bigger”, Roxana Gavrila, marketing and communication director at CreditTeam, stated for “Financiarul”.

Harsh times,new rules

One of the commercial banks that has promoted for years the products with reduced interest at the beginning - Alpha Bank has at the moment only one type of credit for house and land and it is being granted on conditions not at all easy: mandatory advance of 25% for house and of 50% for terrain and the indebt level can’t exceed 50% of the net incomes per family. In what concerns the interest, at the moment, it is variable, for euro being of 9,6% while for lei touches the record level of 19,5%. It must be mentioned that in case of the previous offers, this bank had available also products with interest of 4,9% for the first two years. In case of personal need credits the Annual Effective Interest Rate (AER) touches almost 25%.  “The BNR’s decision of changing the crediting norms determined the banking institutions to drop out the crediting offers with promotional features”, the CreditTeam representative added.

BancPost  is another example in this sense, and has in the offer also only one type of credit mortgage/ real-estate and that is in Euro, the actual interest being of 10,82%. In what concerns the consumption credits, the bank keeps on promoting the “credit with ID”, in the limit of  5.000 euro for which AER touches an impressive level of 22,81% for euro and of 29,83% for lei.

The experts say that removing the promotions in the current context has the purpose to present more clearly the final costs to which the persons that sign a crediting commitment should expect to. At market level, it will be dropped out on short term to a method that could create competitive advantage that limits the offer and affects the demand (that can’t be absorbed in a high percentage).  However, both the demand and the offer are favored on long term, by the fact that the products will be reconsidered from the features point of view, eligibility criteria and they will be remade according to the interests of the population.  Due to the fact that the possibility of contracting credits directed mainly to consumption is limited, it will be gradually dropped out to the consumption demand, fact that will allow to the population to obtain easier finance on long term, without of some major payment engagements.

Trends of banks

The fixed interest for the entire crediting period seems to be the new trend of credits. The banks that offer this type of products, especially in case of personal need credits outline the new trend. “This type of interest allows the population to estimate easier their payment commitments during the entire crediting period, but due to the fact that there are higher costs in stake, it will discourage since the beginning a good part of the consumption demand, concomitantly decreasing the sum that can be granted. What seems to be a disadvantage at the moment (the fact that there are high costs yet from the beginning and thus it decreased the number of the ones that will access an unsecured credit) it will turn into the advantage of the population, during the following years, because it will become more eligible for secured credits”, Roxana Gavrila added.

No matter if we refer to long term or short term credits, choosing the fixed interest has also disadvantages, because according to the experts at the moment the level of interests isn’t the best for customer and in the future it could decrease significantly. The Romanian Commercial Bank promotes the following type of product, “Credit in lei with fixed interest on the entire period, meant to satisfy the personal needs”. According to the bank the main reason for promoting this product is represented by the “the safety that later you won’t pay more for a credit taken now”. The maximum granted value is the equivalent of 20.000 euro, on 10 years and AER reaches to 23,3%.

Increased interests

Since the beginning of last month, most of the banks from Romania have announced the increase for interests and not only to the credits in lei and also to the ones in currency with four or even five percentage. Since then, the “surprises” continued for the ones that have credits at banks, so at the moment the interests for lei exceeded 20%. Among the banks that announced public, or not, these measures were adopted by CEC Bank, BCR, ING, Unicredit Tiriac Bank, Banc Post, Raiffeisen, BRD or Piraeus Bank. Concomitantly, some banks have chosen to increase the interests also for deposits, being known that at the moment is given a big fight for attracting money of the population.

In September, Romanians have crowded to take credits

The non-governmental credit granted to the crediting institutions increased in September 2008 with 5,7% against August 2008, till the level of 194 174,1 million lei, according to the data provided by the National bank of Romania. The credit in lei increased with 2,2%, while the credit in currency expressed in lei increased with  8,7%. On September 30, 2008, the non-governmental credit recorded an increase of  50,5% against September 30, 2007, due to the increase with  36,2% of the element in lei and with 63,9% of the element in currency expressed in lei. The advance of the credit is explained through the fact that the Romanians have crowded to take credits before that the new norms of crediting to enter in force.