Friday, 30 May 2014

Increasingly shorter repayment period of the loan and the creditworthiness

A few years ago, banks willing to grant a mortgage for 40 or 50 years. However, the economic situation a few years ago was very different from the present and for some time we can observe the change of strategy of banks. Currently, the average repayment time is getting shorter, and some banks even withdrew the offer loans for 40 or 50 years. Not without significance is the amendment of the regulations, which came into force at the end of December 2011, and changing the rules for calculating the so-called credit .

The term " credit ", we mean a hypothetical rate that banks use to assess the risks associated with granting a mortgage (as indeed any other) to the operator. Individual banks within the framework of existing legislation can quite freely manipulate the parameters taken into account when calculating this ability , while the revised law requires them to limit the range of predictions for twenty years.

What this means in practice? Until now, if you took a loan for 40 years, the bank will calculate our creditworthiness as the sum that the selected conditions, we are able to pay for 40 years. Since December, however, this period is 25 years, which means that the bank calculating creditworthiness must assume that the lending period is just 25 years. Based on the value of the banks need to determine how they feel about it to the loan amount by which conclude and decide if we can get a loan under certain conditions.

Because so far the banks handling the very optimistic assumptions about the distant future of our credit, shortening the period for calculating the capacity of causes that mortgages are less available and a little more expensive than before the changes. A similar effect is caused, moreover, other changes included in the same amendment.

Why limit the availability of credit by legal regulations? As the growing number and total non-performing receivables in a timely manner, it should reduce the possibility of borrowing. This decision is dictated, moreover, look at the state of our portfolios, which so far by the banks was seen by too rose-colored glasses-regulation has in some way to stabilize the credit market, even at the cost of an increase in their prices.

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