Azernews.Az

The financing of Guarantee Fund for initial payments on mortgage loans, creation of which is initiated by the Central Bank of Azerbaijan (CBA), will be provided from the state budget, the director general of the CBA Rashad Orujov told Trend news agency on Tuesday.

Establishment of a fund is provided in CBA's package of proposals to amend the terms of mortgage lending, which is presented to the government of the country.

"At present, various options are considered for establishment of this structure. It can be created at the Azerbaijan Mortgage Fund (AMF) under the Central Bank or as an independent structure," Orujov said.

According to him, the approval of this proposal will enable the partial insurance of the borrowers' initial payments through the Guarantee Fund's capital and transfer of the funds to the AMF.

"This is beneficial for young families who do not have savings to make an initial payment of 15-20 percent," the director general of the Central Bank said. "For example, the borrower can make a five percent payment and obtain insurance for remaining 10 percent in the fund."

As for payments for services, Orujov noted that the payments on mortgage loans to Guarantee Fund will not create much burden on the borrowers. This mechanism has not yet been considered, but it can be said that the payments will be insignificant.

"The Fund will be capitalized from the state budget as well as the Mortgage Fund. Some 40 million manat are provided from the state budget for next year to finance social mortgage. If the proposal to establish a Guarantee Fund will be approved, the government will consider its funding," Orujov said.

The AMF was founded in December 2005 and began to issue mortgage loans in Azerbaijan in March 2006. In June 2007 the fund suspended the mortgage lending due to lack of financing and resumed lending in June 2009.

Mortgage loans on commercial conditions are allocated through the fund's capital raised from issuing its own bonds.

Under current conditions, the maximum size of a conventional mortgage through the Azerbaijan Mortgage Fund 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.

The official exchange rate on December 25 is 0.7848 AZN / USD.