Study: Mortgage rates down as share of long-term borrowers' incomes despite interest variation

Mortgage rates are decreasing in time as a share of long-term borrowers' income, despite the variation in interest rates, which can reach several percentage points, according to an analysis carried out by the online broker Ipotecare.ro.The company's data shows that the average repayment period of a mortgage loan is approximately 15 years in Romania. The average interest rate on a mortgage loan in lei, equivalent to 65,000 euros, contracted in 2011, was 8.88% per year (ROBOR 3M + fixed margin of 3%). Its average rate was 2,381 lei, representing 160% of the average national salary (1,417 lei) recorded in the middle of the aforementioned year.Currently, the average fixed interest rate for mortgages is approximately 5.60% according to Ipotecare.ro calculations, the mortgage rate contracted in 2011 reaching 1,810 lei, i.e. approximately 33% of the average net salary of 5,351 lei recorded at the national level in February of this year.According to the same source, the mortgage interest rate varied several times during the 15 years analyzed: first, there was a gradual decrease, up to a level of 3.78% per year in 2016, when the rate reached 1,506 lei, representing 72% of the average net salary at national level. Subsequently, the interest rate increased to 5.93%/year, a level recorded in 2019, when the rate reached a value of 1,868 lei, representing 59% of the average net salary at national level.A new period of interest rate cuts followed, driven by fiscal measures aimed at mitigating the effects of the Covid-19 pandemic, with the average interest rate thus falling to 4.47% in 2021, when the rate of the same loan reached 1,618 lei or 45% of the average net salary at the national level.The year 2023 brought a new peak in interest rates, when refinancing the aforementioned loan could have brought a fixed interest rate of 7.32%, with the rate reaching 2,123 lei or 46% of the average net salary at the national level - the share of the rate would thus have increased by only one percent in the average salary, although the interest rate increased by almost two-thirds."A mortgage loan should be analyzed over a period of 10-15 years, during which we have periods with very low interest rates, but also periods with very high interest rates. Overall, however, the rates end up having an increasingly smaller share in a borrower's income, despite certain periods of interest rate increases. In addition, borrowers should consider a refinancing method, at least once during the repayment period of a loan, as the interest rate and, implicitly, rate reductions can be substantial," explained Alexandru Radulescu, managing partner of SVN Romania | Credit & Financial Solutions, the exclusive partner of Ipotecare.ro, quoted in the analysis.The average interest rate on the loan analyzed was about 5.88% during the period 2011 - 2025, while the average rate paid was approximately 1,863 lei, 357 lei higher than the lowest recorded level but also 518 lei lower than the highest recorded level.In 2024, a total of 9.2 billion euros worth of mortgage loans were granted at the national level, according to data from the National Bank of Romania, up 42% compared to 2023, but this also includes refinancings, conversions, transfers and restructurings.