AFTER JULY, Analysts are expecting loans in lei to get even cheaper

Banks" lending policies have taken a different turn since spring, when they have begun to visibly lower the interest rates for new loans denominated in lei and to raise them for loans denominated in Euros.

While those who borrowed in Euros and Swiss Franks are increasingly affected by the raising interest rates, following the raise of the Euribor and the strengthening of the Swiss Frank, those who are now considering a loan can now enjoy interest rates lower by as much as 1.5%.

Analyst Dragoş Cabat, managing partner at Efin.ro, brings good news: banks will continue to gradually lower interest rates for loans denominated in lei, meaning that in September, they will be 2-3% lower than their current levels.

"In September, banks will begin the fight over customers, because they need to make money. They will lower interest rates even further, particularly after July, when inflation will begin to fall", the official of Efin.ro argues. In his opinion, the "First Home" program will stimulate competition, which is why the banks will launch increasingly attractive loans.

The average annual effective interest rate for new loans, granted to the population for buying homes, fell from 10.10% in March, to 9.10% in April, according to data by the NBR. This is the steepest fall registered in 2011 on this segment, when the maximum reduction was 0.42 percent.

On the other hand, the average effective interest rate for consumer loans was 15.59% in April, almost 1.5% less than in March, when it had reached 17.04%.

The annual effective interest rate for new consumer loans in Euros rose from 7.75% in March, to 8.22% in April.

In the case of new loans in Euros for home buying purposes, the average effective interest rate saw a slight drop, from 6.40% in March to 6.29% in April.

• Liviu Andrei, Alliance Finance Broker: Some banks have cut the interest on loans denominated in lei by as much as 2-3 percentage points

There are banks that have currently cut their interest rates by 2-3% compared to April, on new consumer loans in lei without collateral, said Liviu Andrei, executive manager of Alliance Finance Broker (AFB).

When it comes to mortgages, the drop is smaller, with a maximum of 0.5% in June, compared to April, he said, and he added: "This is as the Robor hasn"t changed significantly".

Moreover, bankers continue with their promotions on refinancing offers. "The lowest interest rate would be 12.5%, but it can sometimes go to 13.5% and 14.5%, depending on each bank. In April, the interest rates were 15-17%, for the same type of product", said Liviu Andrei.

At the same time, mortgage loans in Euros still have the benefit of better interest rates, the manager of AFB says: "For instance, interest rates for the First Home loans have a fixed margin of a maximum of 4%, plus EURIBOR 3M (1.49%). This gives us an interest rate of about 5.5%. In lei, the interest rate for the same product equals almost 8%, consisting of 3M Robor (5.43%) and a fixed margin of 2.5%".

• Dragoş Cabat: The interest rates for new loans in Euros will remain constant

While interest rates for loans in lei are continuously dropping, they will remain constant for loans in Euros, Dragoş Cabat considers. That is because the Euribor continues to rise, and banks will continue to cut their margins.

Liviu Andrei adds: "Even though the Euribor nearly doubled over last summer, banks mitigated this when it comes to new mortgage loans, by reducing the fixed margins which are included in the interest rate. The reduction of the fixed margin only applies to new loans, and current debtors who want to benefit from it need to apply for refinancing".

When it comes to mortgage loans, banks had a margin of about 6% last year, when the 3-Month Euribor was at 0.67%, the manager of AFB says. Bankers have now reduced the margin to about 4%, and they will continue to lower it as the Euribor rises, in order to keep an interest rate of a maximum of 6.5%, he considers.

• Ionuţ Dumitru, Raiffeisen Bank: The NBR will keep the key interest rate at 6.25%, which means the interest rates for loans in lei will not be affected

If the NBR were to raise the key policy rate, we would see higher interest rates for loans denominated in lei.

When inflation is high, the Romanian National Bank can intervene by raising the policy rate, in order to make loans more expensive, and to basically discourage consumption, allowing prices to fall.

Still, Dragoş Cabat thinks that it is rather unlikely that the NBR will raise the policy rate, if it hasn"t done that so far, especially since inflation began falling in July. In fact, this is an argument for cutting the policy rate, the analyst says.

Ionuţ Dumitru considers that the inflation will stop rising in July, when the effect of last year"s VAT hike will have worn off, and the NBR, for prudential reasons, will not cut the policy rate, keeping it at 6.25% instead.