Azerbaijan to expand access to mortgage lending

Azerbaijan to expand access to mortgage lending

Azerbaijan, Baku, Oct. 22 / Trend N.Ismayilova /

The Azerbaijani Central Bank (CBA) has prepared proposals to expand young families' opportunities for mortgage lending, CBA director general Rashad Orujov told media on Saturday.

"The Central Bank has prepared proposals to increase the number of young families who will be eligible to receive social mortgage," he said. "According to our estimations, the adoption of these proposals will expand the list and this figure will exceed 150,000 families."

He said that the central bank also prepares proposals to amend the terms of mortgage lending.

"We think that the maximum loan amount must be increased in the social and conventional mortgage. We consider various variants now. They may be increased by at least 1.5 times, that is, loans for conventional mortgage - up to 100,000 manat, social mortgage - up to 60,000 manat. This will correspond to market prices for housing."

He also mentioned about the plans of changing interest rates on mortgage, without naming the level to which they can be reduced. The term for the mortgage loans will not be reconsidered as they meet the international practice. It is at acceptable level, he added.
He said that the Central Bank also maintains an interest in the establishment of the country's housing and savings bank. It considers the opportunity of launching this mechanism. The proposals on improving the country's mortgage mechanism, prepared by CBA, cover the establishment of a guarantee fund for mortgage lending.

"Our proposals include the establishment of a guarantee fund," he said "This will allow individuals, without initial savings, but with the normal financial status and income, to buy an apartment under a mortgage."
Under the AMF's terms, the maximum amount of the issuance of conventional mortgages in Azerbaijan is 50,000 manat at a rate of eight percent and for 25 years. But the amount in the social mortgage is 35,000 manat, at an annual rate of four percent and the term - 30 years.
The initial fee for social mortgage is 15 percent, ordinary loans - 20 percent.
About 72 percent of total loans (41 percent of borrowers were aged 18-29, 31 percent were aged 30-35) fall to young people and young families. Some 28 per cent of loans fall to borrowers over 36 years-old.

Conditions of the mortgage lending are as the following: loans must be issues in the national currency with manats and only to Azerbaijani citizens, and an object of the mortgage can only be an apartment or private houses, volume of the mortgage lending must not exceed 80 percent of the market price, monthly payment for a loan must not exceed 70 percent of debtor's monthly income, as well as presence of an agreement on life insurance and others.

Preferable conditions are granted to members of families of war victims, families of national heroes, internally displaced persons, civil servants with at least a three-year experience, candidates PhD and PhD, persons making special contributions to sport, as well as militaries with at least a three-year service term.
Each family having the right to a lax mortgage loan can use this chance only for one time.

The Azerbaijan Mortgage Fund was established in September 2005 in accordance with the presidential decree as a public institution. Its statute was approved by a separate presidential decree in December 2005. The AMF's main purpose is to establish mechanisms for financing in connection with providing Azerbaijani citizens with houses through long-term financing and attracting domestic and foreign investments in mortgage financing.
The official exchange rate is 0.7869 manat to $1.

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