ArmInfo. The share of foreign-exchange mortgage loans in the Armenian commercial banks' loan portfolio has been 17% over the last five years, Hovhannes Khachatryan, Vice-Chairman of the Central Bank of Armenia (CBA), stated in Parliament on February 10.
Overall, foreign-exchange loans to the amount of AMD 133bln have been issued to 8,000 Armenian citizens. Although the amount is not huge, the loans are actually a burden for citizens given their monthly salaries.
"Exchange fluctuations of 5, 10 or 20 percent cause an increase a borrower's debt, which could cause a loss of housing," Mr Khachatryan said. In this context, he mentioned about 1,000 defaults. In contrast to short- term loans, long-term mortgage loans may have life-long influence on borrowers. "In some cases, debts exceeded the cost of the acquired real estate, and the incomes proved insufficient to resolve the problem," Mr Khachatryan said.
Unlike citizens, lending agencies have risk management mechanisms. They effect margin loan transactions when the loan terms within two years and can issue longer-term loans.
Numerous factors influence exchange fluctuations. At present, the share of mortgage loans in the assets of Armenia's banking system is 3.6%. However, since no one can predict the exchange rate in a couple of years, it makes mortgage lending in AMD terms more advisable. It is important amid the lower inflation, 8%, with prerequisites for the 4% (+/-1,5%) target to be reached by the end of the year. Recently, the CBA left the refinancing rate unchanged, and we hope that the coming years will not see a considerable rise in interest rates with all the factors considered," Mr Khachatryan said.
Armenia's commercial banks and lending agencies will from now on issue consumer and mortgage loans in AMD terms only. Armenia's Parliament is discussing the draft amendments to the Law on Currency Control.