The situations with bank credits in Bulgaria is already not that rosy. In fact, the picture is rather bleak. It is true that applications for loans are many. But apparently most of the applicants, as their document are reviewed immediately go into the category unfit. People who have jobs and a relatively good income for the local reality (between BGN1500 and BGN2000 a month) are even more difficult to decide whether to take a new loan. This is indicated in the statistical data for the past year – consumer and mortgage loans fell. It means that the loans repaid are more than those newly taken. In a situation of extreme unpredictability borrowers operate under the scheme I pay off the debt and escape. Their fears that tomorrow they may not have a job and can provide for their families can not be overcome neither by the depreciation of housing, nor by the
lower cost of borrowing for citizens. In the past year, banks decreased interests as well as the annual percentage rate of costs both on consumer and mortgage loans. They have not done so out of altruism, of course, because this is how they were trying to attract more people to their financial products. But the bad reputation that they created for themselves in the period 2009 – 2011, when banks were raising interest rates, now makes most potential borrowers fear that if they take a new loan, the bank may still after certain period raise interest rates again. The memory of banks’ past deeds is so vivid and frustrating that many customers do not pay attention even to the products with fixed interest rate. And those who are aware, immediately add that the interest rate may be fixed, but fees and commissions are not. However, they form just one-fifth of the cost of credit, especially if it is a long-term one.
The grim image of ruthless moneylenders
which has been established in the past three years, now literally is ruining their business. And this image will be very difficult to change.
Disincentive to potential borrowers is the fact that bids for lending are no longer made to just anyone. The upbeat messages such as Loans like hot cakes, which many banks years ago used to adopt for conquering the market and then redistributing the market shares are no longer fashionable. Now any credit can be given only if the bank has absolutely no doubt that their client will be able to serve it regularly. Incomes are viewed under a magnifying glass, and then again – only those that can be checked through payment of contributions to the Social Security Institute. Arguments of the sort: I get some money, but do not declare it, more often do not fly with bank inspectors (not that exceptions are entirely excluded).
Creditors, as it was before the crisis, prefer to finance customers whose monthly salary is transferred to an account in their bank. Of course, they can block it after the first late payment. This causes additional discomfort in people who have all the right to ask: What if tomorrow I go into any extra expenses for urgent housing repairs or medical treatment and I do delay, while they block my bank account money? Then what do I do?
Especially for mortgages, there is another feature that harasses borrowers even if they have incomes that allow them to pay their contributions regularly. Many banks provide housing loans only if the collateral of the customer is not the home they will buy, but and other property, which the client already owns. This way, many people with relatively high incomes who do not have property and want to buy an apartment, are ruled unsuitable for becoming borrowers. Which in the current market situation is simply nonsense.
In 2013 the market situation is unlikely to improve. In the sense that banks will continue to be extremely demanding on their customers’ solvency and the collateral they receive. As to the price of consumer and mortgage loans, it is possible to go down by another half percentage point or up to one percentage point.
The BANKER
