We are now a good / bad year into the global
credit crunch and more recently things have picked up pace, both with regards
to government rescue plans as well as the fall out upon numerous economies with
the forecast now being for a global recession. As the name suggests this will
affect all countries, although some will be affected more than others.
The Bulgarian government seem confident that
they will escape relatively unscathed, I feel this is a rather confident
prediction, however, they should fare better than many other more developed and
Recently I attended a meeting of the Association of Bulgarian Credit Brokers,
it seems that they were all agreeing that significant changes have occurred in
Bulgaria over the past few months both for foreigners and domestic purchasers,
particularly in relation to mortgages for Bulgarian property. They feel that
prices are stabilising and in some areas and with some property types reducing,
banks are changing parameters and criteria on a regular basis (with much
detriment to clients who have applications in progress with these banks) and
that interest rates have risen sharply (between 1% and 2%). These thoughts are
certainly something that Bulgarian Home Loans would echo.
Banks are happy to lend
In general most banks are still happy to lend to
foreigners but several of the banks are restricting lending in some
over-developed tourist areas as well as reducing the market valuations of
properties to levels far removed from what many foreigners have paid.
This does not affect everyone, just people who purchase in highly priced poorly
The banks are also reacting quite quickly and seem to be changing the loan
parameters without warning and without thinking about how this affects clients
with existing non completed loan applications. One of our banks has stopped
signing mortgage contracts (even though they have been signed by the clients,
they will not tell us why but we can only assume they are unsure about what to
do). Only a single bank, Raiffeisen, has pulled out of the market for lending
to non resident foreigners completely.
Banks are reacting in similar ways all over the world not just with regard to
Bulgaria. However, I believe that the attitude as to how this affects clients
and the long term market is maybe unique to Bulgarian banks.
You have to be a better client
It used to be that most UK clients remortgaged
their UK property and released equity to buy in Bulgaria. This is still a
possible solution, it is just that you now need to have more equity in your
property and be a better client. This is because UK property prices have
fallen, product parameters have reduced (90% plus mortgage are now hard to come
by) and banks are cautious as to who they lend to. An independent mortgage
broker could quickly tell clients what options are available to them.
As an example of current mortgages available in UK and Bulgaria I shall select
two commonly used lenders and products:
Bulgaria Piraeus Bank, 7.86%, 75% of the value of the
property, full income proof needed
UK Halifax, 5.99%, 90% of the value of the
property, full income proof needed
These are not best rates but they are very indicative and more expensive than
they would have been 12 months ago.
Mortgages in Bulgaria can take many months to complete but this is not all down
to the bank. The mortgage process really starts when we first speak to clients
and get some initial documents from them. However, in the case of off plan
property, we cannot actually submit the final application to the bank until the
property is at a particular stage (and they are often delayed) and we have
received a suite of documents from the developer and client. Some lenders are
then quite efficient whilst others are a law unto themselves and take months to
do anything. In general we recommend 12 weeks from when we have received all
necessary documents from the developer and clients, although we have done
mortgages in 4 weeks.
In the UK it has slowed up a little but a re-mortgage could be done in under 4
weeks with the fastest being about 2 weeks.
Many Bulgarian property buyers purchased properties in cash and may be thinking
about releasing equity against these properties in order to pay off debts in
their home country or renovate / improve their Bulgarian property. Both of
these things can be accommodated, there are no hard and fast rules as the world
of Bulgarian mortgages is anything but definitive.
We feel that things will not really improve over the next 6 months until the
global markets get themselves back into order. We are still confident that we
can get the vast majority of clients a mortgage, it is really just a matter of
how much they will be lent and what rate they are willing pay.