The continuing trend of low interest rates and the gradual easing of banks’ standards for granting new loans to households stimulated record growth in demand for housing loans in early 2021.
And this market situation will continue at least in the next quarter against the background of a slight increase in non-performing loans in the portfolio of banks, as well as interest rates.
Such a summary can be made from the second edition of the “Economic Review” of the Bulgarian National Bank (BNB) for 2021, writes money.bg.
According to him, the demand for housing loans in our country has reached its highest level since the previous crisis, in other words for the last 11 years.
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“In the first quarter of 2021, banks reported a continued demand for corporate loans and a significant increase in households, which is particularly pronounced in terms of loans for home purchase. Historically, since the beginning of the survey banks, affecting the household sector (2010), no such increase in demand for housing loans has been observed “, the document says.
Meanwhile, the same survey shows that financial institutions have relaxed the lending requirements for businesses and households, most notably for new home loans.
“The easing of banks’ policy on household loans was also influenced by the favorable prospects for the housing market and the increased assessment of the solvency of borrowers. The weaker risk appetite of banks continued to influence the tightening of their credit policy towards corporate loans. and consumer credit, while a stronger propensity for risk has favored their policy on home loans “, summarized by the BNB.
The central bank points out that banks expect further easing of the requirements of the standards for lending to households.
The BNB points out that the share of non-performing loans in banks’ portfolios is expected to increase in the second quarter and interest rates to “moderately” increase. However, these two factors will not affect the demand for credit. The main drivers of growth in this segment are still low interest rates, as well as positive prospects in the real estate market in the country.
“In terms of interest rates on new loans, we expect a slight increase under the influence of the projected increase in the share of non-performing loans in bank portfolios with the expiration of the extended terms for deferral of liabilities of bank customers”, is indicated in the review.
As for the deposits of Bulgarian households, while in the first months of 2021 they continued to grow as a result of deferred consumption of goods and services, in the coming months the growth in the deposit segment is expected to slow down.
“In the first five months of 2021, the growth of non-government sector deposits in the banking system accelerated compared to the end of 2020 and amounted to 11.7% by May. This dynamics was determined to a greater extent by the growth of household savings and to a lesser extent the growth of deposits of non-financial corporations “, point out the BNB.
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