Romania borrows money at minimal costs both on the domestic and international markets, but has received inquiries from investors concerned about the law on mortgage loans, said Enache Jiru, State Secretary within the Finance Ministry.

“We don’t want to see these concerns reflected in the cost of debt,” he said, reports local Agerpres.

In 2007, the Romanian state borrowed at an average yield of 7%, which later rose to over 14% during the crisis. Only in 2010, the country managed to borrow at a yield of 5% and in the following years the costs continued to go down, reaching all-time lows in 2015.

If the new law on mortgage loans were to apply to the First House program, Romania could have a deficit of EUR 1 billion, Enache said.

The Government guarantees half of the value of mortgage loans local banks grant through the First House program. If only 50,000 of the 170,000 people who have taken loans through this program were to hand over the keys to the banks and stop paying back their loans, then the state would have to pay the banks about EUR 1 billion, or 0.7% of the GDP, Jiru explained.

The law, which is currently debated in the Parliament, allows the mortgage debtors to get rid of their debts by giving the mortgaged assets to the banks.

editor@romania-insider.com