The effects of the pandemic, the long-term war on the border and the accelerated price increases on all levels in the recent period outline an end of 2022 marked by uncertainties. The topic of inflation, as current as it is, is unclear to the general public and, at the same time, generates a feeling of artificial panic caused by untruths propagated in the public space. Ultimately, what is the impact that inflation has on each of us? How much does current inflation influence the possibility of purchasing a home?
Inflation growth is a problem facing all of Europe, not just our country. This index is directly influenced by the price of energy and influences prices at all levels. Therefore, the generalized increase in prices also influences the interest rate increases in the banks' offer for mortgage loans. The good news is that interest rates for loans do not register increases equivalent to the amount of inflation, which has reached a threshold of 15%. Îin addition, there are other methods to help those who want to purchase a home to make an advantageous transaction, including in this context.
How much did interest rates on loans really increase?
“The era of very low interest rates is over”, declared the spokesperson of the National Bank of Romania in a recent interview. He adds that despite the inevitable increases in interest rates, no significant problems are expected in the credit market. How affordable are housing loans for Romanians?
“The reference interest rate is at this moment – November 2022 - 6.25%. On the credit market, we see an increase for fixed interest by 2 percentage points compared to March. In other words, a Romanian now pays, in the case of fixed interest rates, a rate of 2,325 lei compared to 1,878 lei for a loan worth 350,000 RON over a period of 30 years. My recommendation is for those interested to go for fixed interest loans, whether we are talking about loans in RON, or whether we are talking about loans in EURO, explains Dana Lixandru, lending expert and Managing Partner Kingstone Management.
Expert recommendations for accessing a loan
If the current climate forces Romanians to be more cautious with their spending, this does not mean that it is not recommended to invest in a home. The level of rents, in Bucharest and in other big cities in the country, is increasing. Thus, it is more advantageous to pay a monthly installment for your own home than to pay a rent. At the same time, real estate investments remain a good choice precisely because their value increases annually.
“An authorized and experienced broker can be the best solution for a client interested in accessing a home loan. It can not only recommend the most suitable offer from its portfolio, but can also support accessing a loan for all known types of income, from mandate contracts, rents and dividends, to income from abroad. Collaboration with a specialist comes with many benefits, especially since he does not charge a commission from the client”, explains Dana Lixandru.
Such financial consulting services are also offered by some real estate complexes, as is the case with Aqua City.
“Purchasing an apartment îin the Aqua City residential complex comes with free advice throughout the process, from choosing one of the nearly 2000 apartments and until selecting the best financing option. We chose to offer this additional service precisely because we identified from the experience of working with clients their need for information and guidance îin accessing a loan that matches their possibilities”, said Adrian Rus, real estate expert and RE broker/owner /MAX Action.
Last but not least, there is always the option of refinancing, this process helping those with credit to secure, reduce monthly payments or interest rates depending on market conditions. Refinancing can be done at any time, including for those who have accessed a New Home loan, and the repayment commission is 0. In order to make the costs of a loan as efficient as possible, it is important that each client constantly follows what is happening in the market. The duration of a mortgage loan is on average 20 years, so certainly during these years there will be financial fluctuations in everyone's life, economic crises, etc. The most important thing is to know what options and solutions are available to us at the moment when we are going through a difficult period.
So what to do?
Îin conclusion, the real estate market undergoes certain transformations during this period, caused by a multitude of causes. If some of these are quantifiable phenomena, such as the accelerated increase in raw material prices or the difficulty of obtaining building permits, others are artificially induced. “Impossibility” funding or the continued wait for the “market crash” they are clichés thrown into the public space without real coverage, which are based on myths rather than figures. They create insecurity among buyers, and in the economy and business, panic is the biggest enemy of well-being. The solution is simple: regardless of rumours, turn to a professional, such as a credit consultant. Waiting can cost you dearly, and even deprive you of a deal good or the house of your dreams.