30-year mortgages are a mission possible?

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Purchasing an apartment through home mortgages will become more affordable. After all, although the concept of a home mortgage for a term of 30 years is something quite new to Ukraine, it is not a mission impossible. In fact it is quite possible in light of the stiff competition on the local mortgage market

With new players appearing on the mortgage market every day, competition has seriously stiffened. The latest fight for customers is due to the inception of the International Mortgage Bank (IMB), registered by the NBU in December of last year. This is the first specialized mortgage financial institution on the territory of Ukraine created by a highly respected shareholder: Western NIS Enterprise Fund, the owner of a 100% stake in the new bank and which controls over half of the Moscow mortgage market. ?We are not planning to create a network of subsidiaries this year. We will focus on developing partnership relations with banks that have branched-out networks, can sell our products and are not implementing mortgage programs similar to ours,? stated IMB CEO Yuriy Blashchuk. According to him, during 2005 the bank will increase its credit (loan) portfolio to Hr 100 mn. Blashhcuk?s commentary on pricing policy was less direct. ?If you take the market, we will always be in its lower segment in terms of interest rates. But we will not be involved in dumping,? Blashchuk promised.

Apparently the competition does not believe in his statement and quickly began improving their mortgage programs. Changes were introduced to all parameters - from expanding the number of partners to changes in lending terns for the end borrower. ?To date, UkrSibBank is working which two construction companies - TMM and UkrSibInvest. Their plans for 2005 include attracting about five other construction companies to cooperate, including on a regional level,? stated Ivan Istomin, Chief of the Retail Lending Department at UkrSidBank. At the same time, the Kharkiv bank announced a reduction in the down payment on a mortgage for an apartment from 30% to 25% of the property value. For some cities, this limit was lowered to 20% (including Kyiv, Donetsk, Odessa, Kharkiv, Dnipropetrovsk, Zaporizhzhia and Lviv).

Almost at the same time commercial banks began lowering the cost of a mortgage. From the previous 16% per annum, the interest rates have already dropped to 13-15% (in hard currency). Moreover, bankers assure that in the second half on the year the rates for mortgages should return to the pre-crisis level of 12% annually. Another concession to borrowers will be an extension in the term of the mortgage. Up until recently, it was considered an achievement for a bank to provide home mortgages for 10 years and now banks are ready to go for 20 years and more.

Bankers are convinced that borrowers will soon ?respond? to such liberalism. They have already calculated that soon they will be able to increase their mortgage portfolios by 2-2.5 times. This will fully cover losses the market suffered in January and the beginning of February, when buy/sale operations with real estate were suspended due to confusion over certain legislative nuances for registering such deals.