If the interest rate on housing loans rises to 5%, the monthly payment will increase by 300 leva, thus mortgage loans in Bulgaria will rise in price.

According to bourgas.ru, if the interest rate on housing loans rises to 5%, the monthly payment will increase by 300 leva, thus mortgage loans in Bulgaria will rise in price.

In the first quarter of 2022, Bulgarian banks issued new housing loans for a record 1.5 billion leva, which is 43% more than in the same period last year. This is good news for banks, credit intermediaries and developers, but the current situation creates a number of risks for buyers of credit. This was warned by Deyan Vasilev, Chairman of the Association of Credit Intermediaries in Bulgaria, Executive Director of Creditland.

According to the BNB, in the first quarter of 2017-2021, the new volume of housing loans ranged from BGN 580 million to BGN 1 billion.

The guest explained that this is a high result of banks at the beginning of this year? also due to the growth of refinancing – the replacement of one loan with another on more favorable terms. Of the almost 605 million leva of new housing loans in March, 164 million leva is for refinancing. For comparison, in March last year, new mortgage loans were issued in the amount of 418 million leva with refinancing in the amount of 93 million leva.

The monthly installment on the loan should not exceed 40-50% of the income of the buyer / buyers, and some banks provide a loan at a 60% debt / income ratio. According to Vasiliev, there is always a risk that one of the family members will lose their jobs and face financial difficulties.

An element of risky behavior is a person taking an additional consumer loan if he does not have his own savings. This increases debt.

Deyan Vasiliev warned that borrowers should also consider Plan B – a possible increase in the interest rate and an increase in the monthly payment. Data from the European Central Bank show that average interest rates on home loans in the euro area began to rise in March of this year, while the ECB did not raise key interest rates.

With a home loan of BGN 220,000, a repayment period of 25 years and an interest rate of 2.59%, the monthly payment is almost BGN 1,000. However, if the interest rate rises to 5%, the monthly payment will increase by BGN 300.

During the previous financial and economic crisis – from the end of 2007 to the middle of 2009 – the average interest rate on home loans in BGN in Bulgaria increased from 7.8% to 10.5%.

According to the interlocutor, the housing market and lending in Bulgaria have been developing well in recent years due to low interest rates and the rapid development of the IT and outsourcing sector.

High inflation has increased the purchase of real estate for investment purposes.

The war in Ukraine has not yet affected housing loans. Preliminary data for April also shows a record volume of new mortgages, May and June are good again. However, experts are confident that mortgage loans in Bulgaria will rise in price, but we’ll see how much!

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