Some banks have reduced their mortgages interest rates which sparked the increased lending volume in September 2009 and gave an indication that the Bulgarian banks are seeing a potential upturn of the crisis. The lower mortgages rates and further reductions will set the scene for cheaper mortgages and for increased property transactions.
According to the BNB chief Ivan Iskrov the bank system in Bulgaria has ‘high capital adequacy’ and that it was stable with good indicators. During the first two quartiles of 2009, the banks profit overall profit is over 310 million Euros. The BNB also believes that the Bulgarian economy will start growing in the second half of 2010.
The Bulgarian Government is asking the banks to lower the interest rates for deposits and mortgages and is awaiting proposals and measures from the banks for reducing interest rates, to improve market conditions. The banks are currently paying out as much as 10% interest rates on deposit accounts, but as is seems the ‘deposit war’ as it is called is now over and the interest rates for deposit are beginning to decrease. The Bulgarian banks have realized that the there is no more fresh capital in Bulgaria and customers are only transferring deposits from one bank to another offering higher interest rates.
The reduction in the deposit interest rates will lead doubtlessly to lower mortgages rates in Bulgaria in 2010. Nonetheless, 2010 will still remain difficult for the Bulgarian banks as bad loans and defaults will still rise and are likely to reach a peak of 10%. A loan or mortgage is classified as ‘bad’ in Bulgaria when it is overdue for 90 days (compared with 180 in other EU countries)
On the property and real estate front, draft amendments to the Notaries Public Act are going to ensure that all property transactions are done through bank payments – and not cash as has been the case. This is a clear endeavour to halt money laundering. The buyer and vendor will be obliged to declare their bank account information for concluding payment on a property transaction or can use the notary’s account. This is excellent news and will encourage buyers as property purchases will be more transparent.