BAKU, Azerbaijan, Dec. 8
By Maryana Akhmedova – Trend:
The Financial Stability Committee of the National Bank of Georgia has decided to reduce the maximum term of mortgage loans in foreign currency from 15 to 10 years, Trend reports, referring to the statement of the National Bank.
According to the report, the growth of mortgage loans in foreign currency has accelerated from April 2021, in parallel with the economic recovery and tightening of monetary policy.
“If the current trend continues, the annual growth rate of such loans will reach 10 percent in 2022,” the Bank added.
“It is noteworthy that most borrowers are not hedged, which indicates their great vulnerability and, based on the size of the portfolio, contributes to the accumulation of systemic risks in the financial sector,” the statement said.
According to the National Bank, the bulk of mortgage lending is carried out at a variable rate, so loans with currency risk are accompanied by interest rate risk, which is especially important in world markets with historically low-interest rates in dollars and euros, given the prerequisites for a possible increase in interest rates.
“Reducing the maximum terms of mortgage loans in a foreign currency will alleviate these vulnerabilities. Shortening the terms will accelerate the amortization of loans, which will reduce credit risks and contribute to the de-dollarization,” the Bank concluded.
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