Record growth in mortgage loans and real estate transactions – Lending

There is a 24% increase in the number of mortgage loans in our country for the first quarter of the year, said credit consultant Tihomir Toshev in an interview with BNR.

It is a record increase after 5 consecutive quarters of decline in mortgage lending and real estate transactions. The year started unexpectedly intense for us analysts, he explained.

“Certainly, our acceptance into the Eurozone may lead to a jump in real estate transactions, but it is not the main reason. The majority – 96% of the loans – have a floating interest rate, which means that for the next 25-30 years the loan will “float” depending on the economic situation in the country.

Increased demand and a jump in property prices in our country

Upon entry into the Eurozone, the interest rate will be maintained and there may be a slight reduction at the end of the year,” predicts Tihomir Toshev.

And added that “people’s savings grew over BGN 80 billion in banks and the growth of incomes made people more relaxed”.

There is also increased growth in real estate transactions:

“This buying interest will also lead to increase in property value by up to 3-5% by the end of the year. Now it comes from low supply and high demand, despite the many building permits issued. The supply of ready-made apartments is minimal,” he pointed out.

Tihomir Toshev recommended people to be careful in their euphoria not to risk especially 25-30 year loans in big citieswho have no savings and are more likely to go into debt, of the order of BGN 250-300,000.

What will happen to the interest on the loans

“Now the floating interest rate is 2.3% – but it can go to 4 – 4.5%. People should be more careful and predict how their finances will develop. If they see that their company is having difficulties and they will reduce their income, to anticipate, because mortgage loans are granted for 30 years. Credit consultants explain the risks in possible indebtedness. If now the interest rate is 2% on the loan, it can become 4-4.5%,” explained the credit analyst.

He explained that on the night of Bulgaria’s entry into the Eurozone, loans will be revalued, as well as income, and in the future they will be serviced in euros.

“I don’t expect that joining the Eurozone will hurt borrowers”claims Toshev.

But after 3-4 years “if the banks decide that they want a resource and offer interest on deposits, they will also raise the interest on loans, usually twice a year this is done. People have to they know, by signing a loan agreement, what their interest rate depends on and when it changes”.

The installment on a home loan jumped by BGN 400

There is also growth in consumer loans, but “it is not so great – it is more difficult to grasp the percentage of growth, because they are short-term”.

Toshev recommended to take out loans for important things – repairs, family car, etc., but it is not wise to go into debt for vacations and luxury goods.

Savings have increased by 9% compared to 2023.

“We have more than BGN 80 billion as deposits in the banking system, incomes increased due to inflation. Because of the war, people focused on saving. This growth will continue and in 2024 we can report that they had BGN 90 billion.” Tihomir Toshev calculated.

He said business loans are also growing because business is stable, 2023 has been a good financial year and “they are now looking to expand and improve their facilities”.

For more financial news and other useful tips about your personal finances, you can follow us on Facebook or Google News Showcase