Recently our citizens were applying to our editorial office as well with such alert calls. They were mentioning names of those banks, which would refuse to provide credits. We indeed because of understandable reasons will restrain ourselves from publicizing the names of those banks. Instead we will try to publicize the changes, which the banks offer to the clients and particularly the changes in the mortgage credit market. In the second half of September people started to speak that mildly said no positive changes are expected and that the international crisis will by all means affect the financial market of Armenia. The General Director of the VTB Armenia Valeri Ovsyannikov was among the first, who spoke about that. He said, “The percentage rates will continue to grow in the financial market of Armenia and the means will get expensive.” He substantiated his words with the issue of consumption, which currently exists worldwide. They say that the financial management of Armenia complained that Mr. Ovsyannikov made grim statements about the financial situation in Armenia. And the trade banks would categorically deny that they were planning to increase the percentage rates and restrict the crediting conditions. At present the VTB offers mortgage credits at 15-19% instead of the previous 12-16%. The amount of credit is reduced as well – instead of 25 million AMD 20 is offered. The HSBC Armenia is in a “floating rate.” There is a calculative rate which is added by extra percentage rates. For example, the mortgage credit offered in AMD is 8.25%. According to the web site of the bank the extra percentage is 5.75% instead of the previous 3.75%. As a matter of fact the percentage rate of the credit is increased by 2%. The table presented below will be interesting to the ones, who are planning to buy real estate on credit. We have taking the data from the official website of the banks (see the table). As you have noticed the process of getting a mortgage credit has become really difficult.
“Optimistic” inaction
The reason is not clear, more accurately vivid. The Central Bank and the trade banks keep declaring that the international crisis didn’t affect the financial market of Armenia. They stipulate the increase of percentage rates not by the crisis but by the re-financing rate of the Armenian Central Bank, which is done to restrain inflation. This is surprising if we consider the fact that since June the CB has periodically increased the rates of re-financing, however the banks wouldn’t react that way till September. The RA CB delivers an optimistic “message.” “In general 86.8 billion AMD mortgage credit was provided,” says the CB management. And as my colleague at the newspaper says the optimism of trade banks is more than understandable. They are increasing their rates and will even more increase next year and meanwhile say that the volume of crediting is not decreasing. In the opposite it is increasing. Nevertheless, in order to receive credit not only desire is enough but concrete financial means. It’s known in the world that the means of trade banks are accumulated at the expense of the savings of citizens. The foreign banks, for example, needed such means and started to face the issue of consumption. The governments of those banks helped them. But it will never happen in Armenia because in order to help the government needs to confess that there is a problem. But our government keeps saying no problems.
Save or not?
Have you noticed that the increase of percentage rates is somehow reflected in TV commercials? The trade banks prefer not to speak about the increase of percentage rates but instead “strangle” us with the abundance of commercials on savings. They invent beautiful names of savings accounts and convince the citizens to save their money in their banks. At first sight everything is OK. The banks do their job of course a little more intensively than in past. However, even the most tempting commercial is powerless if there is no money. More accurately, there is money but it’s getting less. Because the international crisis doesn’t affect us but it affects our partner Russia. Therefore it affects the incomes of our compatriots working in Russia and thus it affects the amounts of monetary remittances from Russia and as a result the savings amount decreases as well. There is another circumstance as well. The banks accept deposits at annually 11%. However, in the black market these rates are incomparably higher. For example, in Gind newspaper we can read advertisements, which say that “we need money at 4-5% monthly, which makes 50-60% annually.” And that is 5-6 times more offered by the banks. Of course every person thinks and compares the profitability and risks. The bank pays less but it’s safer. However, in the environment of uncertainty the risks of savings in banks also increase and the preference is now given to the black market. And the last fact is the uncertainty that exists. It would be funny to say that the person is saving money in the banks only to receive annual incomes and especially now when inflation almost equals the percentage rates. In the event of short-term deposits the banks only pay 6-7% annually. And as a rule our citizens shun to deposit their money for more than a year. They fear not as much as the bankruptcy of banks but fluctuation of the currency rates. They don’t know how to save their funds – in AMD, USD or Euros. Saving the dollars under the pillow is not profitable. You make the money “sleep” and it may even be stolen. But the advantage is that if the dollar is devaluated some day it will take several minutes to exchange the USD to AMD. And as you know it is harder to forecast the fluctuation of USD-AMD than international crises.