Mortgage Lending in Bulgaria May Become More Expensive – Experts

Proposed changes to Credit Institutions Act may lead to higher interest rates, according to bank experts.

Instead of protecting borrowers, the changes proposed by MPs from ruling Bulgarian Socialist Party, BSP and liberal predominantly ethnic Turkish party Movement for Rights and Freedoms, DPS may achieve the opposite effect and deprive of financing many Bulgarians, commented bank experts for “Trud” newspaper.

The experts’ comments come in response to information that Bulgarian Parliament is working on a draft law proposal with changes to Credit Institutions Act.

In regards of mortgage lending, charges on early repayment will be removed and default interest on mortgage loans will be limited to the statutory interest rate.

Also, banks will have more difficulties in pursuing delinquent borrowers, for example – if the residential property securing the mortgage loan is the only one owned by the borrower, in case of default in payment, the bank will be satisfied only to the extent received from the sale of the property and if the amount of money won’t be enough the borrower won’t have to continue to pay to the bank, according to the draft proposal.

"I think that these proposed changes to the Credit Institutions Act won’t come into effect”, commented for “Trud” Chief Economist at Institute for Market Economics, IME Desislava Nikolova.

If the changes become in effect banks will calculate them as new risks that will be passed onto the borrowers in the form of an increase in the price of mortgage lending and higher costs of credit, therefore leading to raise in interest rates and narrowing the access to mortgage lending, explained Nikolova.

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