Is mortgage lending suspended? – Interview


October 4, Fineko/abc.az.For some time there were rumors among the population about the termination of giving mortgage loans in Azerbaijan. To clarify these and other matters, we sent a request to the Mortgage & Credit Guarantee Fund of the Republic of Azerbaijan.

We present to your attention the interview given by the Fund to news agency ABC.AZ.

There are rumors among the public in connection with mortgages - some talk about the suspension of giving of mortgage loans. How true are those rumors? 

As you know, the introduction of a system of mortgage lending has begun since 2006 with the purpose to improve the living conditions of the population of Azerbaijan,. The total amount of mortgage loans given in 2006-2019 at the expense of the Azerbaijan Mortgage & Credit Guarantee Fund amounted to AZN 1.33 bn, and at the expense of those mortgages about 27,000 families were able to improve their living conditions.

Please be informed that ordinary mortgage loans are raised by the Fund from domestic financial markets, and subsidized mortgage loans are given at the expense of funds allocated from the State Budget.

In this regard, we note that at the beginning of each year the Fund sets limits for authorized banks on both ordinary and subsidized mortgage loans. This year, the allocation of limits to banks for mortgage loans has also been ensured. Within the set limits, the authorized banks have given mortgage loans in the amount of AZN 117.0 million in 2019. Mortgage lending will continue until the end of the year.

In addition, it should be noted that part of the funds allocated in 2019 from the State Budget for financing of subsidized mortgage lending in the amount of AZN 40 million is aimed at supporting the sale of apartments at the disposal of the State Housing Construction Agency, and currently the issuance of subsidized mortgage loans for the purchase of toese apartments is ongoing successfully.

Since both subsidized and ordinary mortgages are offered on favourable terms, there is currently a high demand for such loans.

We note that the Fund regularly studies the demand in the mortgage market and considers the question of additional limits as part of attractive opportunities to ensure the sustainability of mortgage lending.

Will there be any changes in the terms of mortgage lending in the near future?

We’d like to note that mortgage lending is always in the spotlight as an integral part of the social policy of the state on the improvement of the living conditions of the population. In order to improve the system of mortgage lending, expand access to mortgage loans, and automate the lending process, the Fund and relevant governmental agencies regularly carry out consistent measures.

For information, we would like to note that over the past period in order to increase the amount of mortgage loans to the maximum, to expand the range of persons wishing to obtain preferential mortgage loans, to expand access to mortgage loans for citizens with insufficient down payment, to introduce a mechanism for guaranteeing mortgage loans, to apply in the regions different approaches to the analysis of income and expenses to stimulate mortgage loans, to protect the rights of borrowers with deteriorated solvency, a restructuring mechanism was created and a number of significant changes were made.

In connection with the above-said, the Fund periodically examines population’s needs, the existing problems in mortgage lending, as well as experience of advanced countries in this sphere, which is applied with taking into account the peculiarities of the country. If necessary, the Fund will continue improving the system in the future.

It is argued that the conditions of mortgage loans in Azerbaijan are more stringent than in neighboring countries. What do you think about this statement?

In connection with your question, we’d like to note that at present, both subsidized (4% per annum) and ordinary mortgage loans (8%) with very favorable interest rates are given at the expense of the Mortgage & Credit Guarantee Fund.

Ordinary mortgage loans are given by the Fund from the financing raised from domestic financial markets, and subsidized mortgage loans from the State Budget. Along with subsidized mortgage loans, the role of state support in keeping the low interest rates on ordinary mortgages and accessibility to the population should be emphasized.

In addition, I’d like to note that as a result of healthy competition in the field of mortgage lending in recent years, authorized banks offer mortgage loans to the population with lower interest rates, as a result, despite the fact that the maximum interest rate is set at 8% on ordinary mortgage loans, the average annual interest rate on ordinary mortgage loans given in 2017-2019 made up 7.3%.

In neighboring countries, where mortgage lending is more developed, the interest rates on mortgage loans are higher than in Azerbaijan. Thus, in Russia the interest rates on mortgage loans are 9-10%, in Kazakhstan 12-14%, and in Turkey 12%.


Author: Elmir Murad