Creditul ipotecar, the banking product for Romanians who want to buy or build a home, has celebrated its 20th anniversary on the local market. In September 2001, Alpha Bank Romania announced the launch of Alpha Housing, the first mortgage loan that allowed the purchase of a house without any other guarantees than the mortgage on the purchased property and without guarantors.
The loan was granted in dollars, for a maximum period of 10 years, with a down payment of 30% and was designed for the purchase of a dwelling, the construction of a house, the purchase of land for construction or the renovation of the house.
“Alpha Bank Romania launched the first mortgage loan that was intended for individuals and was entirely based on their ability to repay that loan. It was a milestone in the development of the retail market in Romania, which after this key moment developed at a very fast pace. Over the last 20 years, the product range has been continuously developed and we have supported more than 45,000 Romanians to buy or build the home they wanted,” said Sergiu Oprescu, Executive Chairman of Alpha Bank Romania and Managing Director of the Alpha Bank International Network.
At the end of June 2021, Alpha Bank Romania’s outstanding mortgage loans exceeded RON 6.29 billion (EUR 1.28 billion).
The range of products has been constantly improved during this period, and Alpha Bank Romania today offers multiple solutions for customers who want to purchase a home, exchange their home for a larger one, build a house or purchase land for construction, or refinance their mortgage loan from another bank. In other words, a full range of mortgage products, including green financing solutions for those who want a green home.
The government’s “Prima Casa” programme, launched in 2009, has supported the revival and expansion of mortgage lending, with Alpha Bank Romania being the second bank in the system to join the programme.
Alpha Bank Romania continued its pioneering role in the field and launched, in 2019, the first mortgage bond issue on the local market – an important moment for Romania, which thus entered the European community of mortgage bond issuers and investors. Alpha Bank Romania thus marked a new first on the local market and covered the entire development arc of the mortgage market, opened with the first loan of this type, in 2001.
The outstanding quality of the mortgage portfolio and the status of expert in this area were also recognized by Moody’s Investor Services rating agency, which in April this year raised the rating of the mortgage bonds issued by Alpha Bank Romania to A3, one of the highest ratings given by Moody’s on the Romanian market.
At the same time, Alpha Bank Romania has been a member of the Romanian Green Building Council (RoGBC) since 2018, and in November 2020 became the 66th European lender to join the Energy Efficient Mortgage Initiative.
Growth driver for lending, market-wide
At market level, the balance of mortgage loans reached 94.28 billion lei (19.14 billion euro) at the end of June 2021, and the number of active mortgage loans exceeded 540,000, according to Credit Bureau data.
Over time, mortgage lending conditions have been relaxed by extending the loan period to 35 years and reducing the minimum down payment, with the stock of mortgages growing continuously since its launch. The expansion of housing credit remained accelerated after 2008, with an average annual growth of more than 10% in the post-crisis period, with the increase in the mortgage balance supported by the “Prima Casa” programme.
“In 2009, and then in the period 2012-2016, mortgage credit was the only growth driver of non-government credit. In the remaining years, with the exception of 2011 and 2018, the expansion of housing credit was the source of at least half of the growth in non-government credit,” Sergiu Oprescu adds.
Regarding the currency in which Romanians borrowed during this period, the share of mortgage credit in lei in total mortgage credit increased from 10% in December 2007 to 79% in July 2021. The increase is due both to the change in the legislative framework and to the significant decrease in interest rates on loans in lei since 2014. As regards the repayment of these loans, the non-performing loan ratio in the mortgage segment is very low, standing at 1.68% (at the end of March 2021).
Romania ranks first in the EU in terms of the number of home owners, with almost 96% of Romanians owning the properties they live in, compared to the European average of 69.9%. But we are lagging behind when it comes to the share of mortgage loans in GDP, with 8.4% in 2020 (up from 3.3% in 2007).