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Bulgarian Mortgage Update

According to data of the Bulgarian National Bank (BNB) the number of granted mortgage loans increased by 16.5% in the first two months  of 2011 compared to the same period in 2010.

The increase in the number of granted mortgage loans is accompanied by a drop in the average interest rates of the loans in January and February 2011. They are between 0.5 and 1 percent lower compared to the period January and February 2010. Since the second half of 2010 the average interest rates for mortgage loans in BGN and EUR are between 7.8% and 8.5%, as the interest rates for loans in EUR are lower than those in BGN. According to BNB's latest data for February the average interest rate for mortgage loans in BGN is 8.32% and in EUR the percent is 8.13, while these figures were 9.31% and 8.49% respectively a year earlier (pic.1)

After an increase of 11% in the credit activity in January compared to the same month in 2010 the volume of granted mortgage loans continued to increase in February as well - by 21% compared to Feb. 2010. The volume of mortgage loans in BGN in the first two months of 2011 decreased by 21% while the granted mortgage loans in EUR increased by 32% compared to the first two months in 2010. In the last couple of years the share of the granted mortgage loans in EUR is increasing as in 2010 it reached 77% of the total number of granted mortgage loans.

In 2010 there was an increase of 8.9% in mortgage loans compared to 2009 when the banks' mortgage activity dropped by 62.6% compared to the peak values in 2008 (pic.2). In 2010 the granted mortgage loans made 1.9% of Bulgaria's nominal GDP, as in 2009 they made 1.8% and in 2008 - 4.6%.

The increase in the number of granted mortgage loans and the drop of the average interest rates under mortgage loans this year, the increase in the direct foreign investments to Bulgaria in January compared to a year earlier and the beginning economic recovery of the country give out positive signals to the real estate market. What still has negative effect is the high unemployment rate and people's insecurity in their income.

*Bulgarian banks still maintain strict conditions for granting loans to foreigners

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