The net wealth of Romanians was at the end of 2020 at an all-time high, increasing by 6.1% compared to the previous year, shows the Report on Financial Stability published on Thursday by the NBR. Three quarters of the wealth consists of houses and apartments (real estate assets) and only a quarter of the wealth is represented by financial assets. This is largely due to legislation that encourages holding real estate rather than (re) investing in productive activities, the report said.
The value of houses and apartments increased by 4.8% in Q4 / 2020 compared to Q4 / 2019, amid the increase in the real estate price index and the depreciation of the national currency, indicating the resilience of the real estate market.
- Financial assets account for about 24% of the total, as opposed to the euro area, where they account for about 45% of the population’s wealth,they sell a growth rate of 8.8% for the analyzed period. This gap highlights the low capacity to mobilize domestic capital and the dependence on attracting foreign capital.
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In the structure, among the financial assets, the population sector shows its predisposition to secure instruments, such as cash and deposits (representing about 39% of the total financial assets of the sector) followed by investments such as private pensions.
The real growth rate of deposits and cash (14% as of December 2020) has brought them to 30% of GDP, the highest share in 14 years.
However, It is worth mentioning the polarization of savings: according to data published by the Bank Deposit Guarantee Fund, only 0.3% of deposits exceed the guarantee ceiling of EUR 100,000, representing 22% of the total value. Their share has shown an upward trend in recent years, reaching a maximum of the last 10 years, signaling an increase in inequality and polarization of the population’s wealth.
The NBR Board decided to reduce the monetary policy rate fourfold since the outbreak of the COVID-1929 pandemic, with adjustments totaling 1.25 percentage points. Due to the high proportion of variable interest loans as well as the long maturity of mortgages, the decrease in the monetary policy rate is likely to have a positive impact on the demand for new mortgages, also leading to a lower debt service for borrowers. who have already taken out a loan.
Thus, in the case of a person with a mortgage loan in the amount of 200,000 lei, the median value for mortgage loans in stock, with a maturity of 25 years, the reduction of the interest rate by 1 percentage point translates into a decrease in debt service by approximately 10 %.
The European Banking Authority has allowed the extension of the rate suspension until 31 March 2021, provided that the total rate suspension period does not exceed nine months. The new provisions of the EBA Guide were taken over at national level through GEO no. 227/2020. Despite the extension, only 0.5% of borrowers who took out a consumer loan, respectively 0.3% of those with a mortgage, benefited from the suspension of rates in March 2021, indicating a return to economic activity and a decrease in uncertainty. related to income security.
In the short term, the measure has prevented an increase in the default rate, but these borrowers need to be closely monitored, as risks of default may arise after the expiry of the period of suspension of installments in the event of income shock suffered by borrowers. it becomes permanent by losing your job or reducing your salary.
These risks began to materialize, with borrowers benefiting from the suspension of installments having a 32 non-performing rate higher (7.4%) than those who continued to pay installments (3.1%), with the largest differences being recorded. in the case of consumer loans. However, it is important to note that most of the increase in the non-performance rate comes from the classification of non-payment exposures, which have not yet been delayed for more than 90 days, indicating in this case prudent behavior by credit institutions. In addition, the risk is more pronounced for borrowers with a debt service to income (DSTI) of over 50%, representing 32% of the exposures for which the suspension of rates was requested, with a default rate of 7%. , 5% vs. 4.5% for debtors who did not request the suspension of installments.
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