Central bank: Azerbaijan does not consider reduction of mortgage rates
The Central Bank of Azerbaijan (CBA) doesn't expect lowering interest rates on mortgages under proposed changes aimed at improvement of the conditions of mortgage lending in the country, General Director of the CBA Rashad Orujov told Trend news agency.
"Four-percent rate on social mortgage applied in Azerbiajan is one of the lowest rates in the world. Currently, Russia's Agency for Housing Mortgage Lending, however, discusses the increase of interest rate to 12 percent. Respectively, considering rate reduction in Azerbaijan is unreasonable," Orujov said.
Banks, he said, are interested to carry on with the current lending rate, as the margin they are receiving at the mortgage lending is three per cent despite the fact that they need to take the risk of the loan and maintain it for 25 years.
"As part of proposals to modify the mortgage lending, possibility of increasing the maximum amount of credit... and increasing range of recipients of social mortgage is considered," Orujov said.
The maximum loan amount under the social mortgage is proposed to increase to 50 million manat from the current 35,000 manat, and conventional mortgage amount to double, to the total of 100, 000 manat.
The draft state budget for 2013 to finance mortgages envisions allocating 40 million manat, which is double the amount for the current year. The total budget of the mortgage loans in the next year will be 100 million manat, which will be achieved by raising funds from other sources, the head of the CBA Elman Rustamov said earlier.
The decision to change the terms of mortgage loans, he said, will be made in 2013.
Under current conditions, the maximum amount of a conventional mortgage through the Azerbaijan Mortgage Fund (AMF) is 50,000 manat at a rate of eight percent and maturity of 25 years. Through the social mortgage - 35,000 manat, at an annual rate of four percent and the term of 30 years. The initial payment for the social mortgage is 15 percent, and for conventional loans, 20 percent.
Mortgage terms are as follows: loans must be issued in national currency - manat, and only to Azerbaijani citizens; subject to the mortgage can only be an apartment and a private house; the amount of mortgage loan should not exceed 80 percent of the market value of the property; the monthly payment for a loan must not exceed 70 percent of the borrower's monthly income; presence of an agreement on life insurance is obligatory. There are also other conditions.
Preferential conditions apply to members of war victim families, families of National Heroes of Azerbaijan, internally displaced persons, civil servants with experience of not less than three years, Candidates and Doctors of Science and people with special achievements in sports, as well as military service with a minimum experience of three years.
Today, there are 27 banks authorized by AMF. 21 insurance company and 13 appraisers are parties to the mortgage market.
The official exchange rate for December 24 is 0,7848 AZN / USD