Last week the preliminary work on improvement of the mortgage crediting was summarized in Azerbaijan. The Azerbaijan Mortgage Fund (AMF) presented to the Cabinet of Ministers the final variant of rules on issue of privileged crediting of state privileges on mortgage crediting (social mortgage). After the consideration it will be submitted to the President's Apparat.
Simplified terms for approval of mortgage credits enable the young Azerbaijani families with low incomes to benefit this service. In accordance with the draft rules, annual rates will be decreased to 4%, the term of issue of the credit will be expanded from 15 to 30 years. Thus, depending on the category of beneficiaries the term can be doubled. Another change envisages halving the initial fee and injection of parallel institution of insurance. The maximal rise in credit was established in the level of 35,000 manats.
There is another change that enacted into law. In accordance with the resolution of the Managing Board of the National Bank of Azerbaijan, quotation rate on mortgage credit will be cut to 2% from 20 November 2006. The resolution was adopted with respect to issue mortgage credits for greater portion of population and increase of opportunities for use of this financial service among population. Cut in quotation rates promotes cut in average statistic indicator of efficient interests on mortgage credits.
The rules stipulate an increase of maximal sum of the credit twice to 50,000 manats, with the consideration the rise in prices for property and demand, because the current ceiling for 30,000 manats actually restricted the buyers.
Thus, the government passes from more market model to more socially-directed model. Cut in rates on the one hand decreases payment for definite category of population, but on the other boosts the demand for state financial resources. However, the Insurance Fund will be an independent insurance body which will meet the objectives of insurance of initial fee which will not be repaid by a borrower. So, having released from payment of the initial fee the borrower should insure it in this organization.
The injection of changes into the terms of mortgage crediting will increase the demand for crediting 2-3 times. Over 8 months the agent banks of the AMF have issued some 3mln manats, whereas $400,000 manats were issued in Kazakhstan in the first year. It also increases the public awareness. Afterwards it is possible to forecast mortgagee boom in Azerbaijan.