Monday, December 25, 2023, 9:21 p.m
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In a few days we enter the new year, and January 1, 2024 brings the increase of the VAT rate for new properties purchased from legal entities, but also the update of the IRCC index, which will not come with a significant decrease for the period 01.01 – 31.03.2024.
Thus, the good news is that the rates of existing loans with variable interest rates linked to IRCC will have approximately the same value, and Romanians will still be able to access new mortgages or refinancing loans with very advantageous fixed interest rates, credit experts say.
“For more than 6 months, fixed mortgage interest rates have been at a very low level. We can say that fixed mortgage interest rates have reached a record low of the last 2 years.
As a result of the fact that IRCC will not see a significant decrease starting in the new year, the decrease being around 0.08%-0.1%, until the end of March 2024, variable mortgage rates will not decrease and will continue to be approximately 30% higher than fixed mortgage interest rates. But people can always opt for fixed interest refinancing,” Valentin Anghel, CEO of a bank brokerage agency, told Ziare.com.
Here are the interest differentials, assuming IRCC will be 5.88% starting January 1, 2024:
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Variable mortgage interest: 2.1% + IRCC, i.e. approximately 7.98%, to which the cost of life insurance is added;
FIXED interest for 3 years mortgage credit: 5.75%, to which the cost of life insurance is added.
Thus, the fixed interest rate is lower by 2.23%, which is not a small amount for a mortgage loan, explains the specialist.
Let’s also take an example of a concrete calculation for a NEW mortgage loan, contracted starting on January 1, 2024 for both interest options:
Credit value: 300,000 lei;
Lending period: 30 years;
2275 lei is the mortgage loan rate with VARIABLE interest (2.1% + IRCC of 5.88% + life insurance);
1829 lei is the mortgage loan rate with FIXED interest (5.75% + life insurance);
“Opting for a new or refinancing mortgage loan with a fixed interest rate for 3 years implies a significant saving of money with which Romanians can pay for housing maintenance and even the related utilities. The rate of the mortgage loan with fixed interest rate is even 20%-25 % lower than the variable interest mortgage rate.
Therefore, for at least the first quarter of 2024, mortgage loans with fixed interest rates for 3 or 5 years continue to remain the most advantageous lending options of the moment,” added Valentin Anghel.
If inflation continues to fall, and if BNR will reduce the monetary policy rate, rates may see slight declines in early 2024, but there is no definite information on this.
“Regarding the real estate market, real estate prices will increase by at least 4% due to the VAT increase. In addition, we must take into account that the real estate market is inversely proportional to the banking market. In conclusion, when loan interest rates are very affordable , the purchase demand increases, and this can accelerate the increase in the prices of new or old real estate,” says the expert.
In the opinion of Valentin Anghel, “even if now mortgage interest rates are higher than they were 2-3 years ago, it is better to buy a property now with a lower price, but with a slightly higher interest on the loan, than to you buy the same property later at a higher price, but with a lower future interest rate. You can always refinance the loan at a lower interest rate, but you can’t get a lower price for the house after you’ve already bought it.”
As challenging as the banking and tax updates that will be adopted starting in 2024 are, there are always solutions for Romanians who want to purchase their own homes, but also for those who want to refinance loans contracted in the past, which have now become more difficult to repay.
“The banking market is a living organism, interest rates are periodically updated, and when certain categories of interest rates increase, others decrease. The objective of the banks is not to stop lending, which is precisely why the fixed interest rates of mortgage loans have decreased considerably,” Valentin Anghel reports.
2023-12-25 19:23:44
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