Central Bank: Mortgage terms to be eased in Azerbaijan

Business Materials 11 April 2013 15:08 (UTC +04:00)

Azerbaijan, Baku, 10 April / Trend A.Akhundov /

The Central Bank of Azerbaijan (CBA) is finalising a national programme for the development of mortgage lending, the chairman of the Central Bank Elman Rustamov told journalists.

"In the coming days it will be discussed at the relevant committee of the Central Bank and then submitted to the government," Rustamov said.

According to him the main goals of the state programme is to bring the mortgage scheme in line with market principles and the use of the funded mortgage system so that people use their savings for mortgage loans and the easing of credit conditions. Rustamov does not see the need for a separate law 'On social mortgage' designed by parliamentary committees.

Regarding the use of the funded mortgage system, it was previously envisioned in the framework of the draft law 'On housing savings banks' developed by the CBA. However, the financial crisis in the global market did not allow the promotion of this project as these systems are activated not in any, but only, in a trustworthy economic situation, attractive to investors of building up savings. The essence of the housing and construction banks will be in the fact that citizens will be able to get mortgage loans through deposit accounts at the bank. In this case, the amount of the loan will be significantly greater than the amount of the deposit.
"Commercial mortgage terms should be formed in accordance with the requirements of the market," the head of the CBA said.

The state programme will revise the number of commercial loans through the Azerbaijan Mortgage Fund (AMF). The proposal to raise the maximum amount of the regular mortgage to 100 manat remains in force, the CBA said earlier. However, it is not expected to change the level of the down payment loan. The proposal to expand the coverage of a social mortgage for young people also remains in force.

Currently, the maximum amount of both the conventional and social mortgage is 50,000 manat. Conventional mortgage loan can be obtained at a rate of eight per cent and a maturity of 25 years, whereas a soft loan is at the rate of four per cent for 30 years.
The initial payment under the social mortgage is 15 per cent, while for conventional loans 20 per cent.

Mortgage terms are as follows: loans must be issued in national currency of the manat and only to citizens of Azerbaijan. The subject of the mortgage can only be an apartment or private house; the amount of the mortgage should not exceed 80 per cent of the market value of the property; the monthly payment for a loan must not exceed 70 per cent of the borrower's monthly income and there must be the presence of an agreement on life insurance. There are also other conditions.

Preferable conditions are granted to members of families of war victims, families of National Heroes of Azerbaijan, internally displaced persons, civil servants with at least a three years' experience, candidates and doctors of science, persons making special contributions to sport, as well as the military with at least a three-year service term.

Each family having the right to such a mortgage loan can only use the opportunity once.
Since the beginning of the financing, the AMF granted mortgage loans of more than 421.89 million in 2006-2012 (74.77 million manat in 2012, 95.64 million manat in 2011, 97.08 million manat - in 2010, 76.9 million manat in 2009, 70.2 million manat in 2007, 5.6 million manat in 2006).

In the first quarter, the AMF provided loans amounting to 15.19 million manat, or 4.47 per cent more than the same period last year.

Currently there 27authorised banks in the Mortgage Fund and those operating in the mortgage market include 21 insurance companies and 11 appraisal organisations.

The official exchange rate on April 10 is 0.7846 AZN / USD.