They say that in the nearest future the interest rates of mortgage loans will decrease by 1.5-2%. The thing is that the National Mortgage Company established about 1.5 months ago starting from September 1 will re-fund the mortgage loans of trade banks by 7.5% instead of the previous 9%. Reminder: The mentioned company has virtually started operating from July 10 of the current year by signing the first refinancing agreement with one of the trade banks of Armenia. During this period the company has signed agreements with 6 trade banks by refinancing 30 mortgage credits worth of 150 million AMD. The director of the company Mher Yedigaryan mentioned that presently the process of providing 50-60 credits worth of 200-300 million AMD is pending. Besides the decrease of interest rates, from September 1 certain provisional reforms were made, according to which an opportunity is created to refinance also the credits, which will be set for two types of properties. This means that if the mortgage for both the apartment to be bought as well as the one that already exists, the amount of the deposit payment will be decreased by 10% instead of the previous 30%. Indeed, certain time will be needed till the trade banks make the necessary reforms in their credit conditions but certain banks have already lowered their interest rates. For example, the Ararat Bank instead of the previous 14-16% of interest rates offers credits at 12-14%. Indeed these steps are on behalf of the mortgagor and will perhaps bring certain activation in the mortgage market. During his interview to one of media reporters Yedigaryan expressed an opinion that even now certain positive progress is noticed. “The demand definitely increases. Moreover, it is increased quite fast. If in May-June the real estate market was almost motionless then starting from July the market was quite activated. The access of the National Mortgage Company created certain activism in the market and for the trade banks. If the motive continues then we expect that in the fourth quarter the activism of the market will be relevantly active to the same period of the previous year,” he said. In this regard, the opinions are different. Some people think that activism is noticed, others think the opposite. For example, the real estate agency Akcern informed us that there is no activation in the real estate market. The representatives of Bars real estate agency have an opposite opinion. The director of the agency Marina Chatinyan told us that compared to the first quarter there is indeed certain activation in the market. However, she believes that this is not only stipulated by the decrease of the interest rates. The data of the real estate state cadastre speak in this favor of this viewpoint. For example, the director of the National Mortgage Company mentions that in May-June the market was almost inert, however, according to the report of the state real state cadastre in the second quarter of 2009 the number of transactions in the republic increased by 30.2% compared to the first quarter of 2009. For the comparison let us mention that in the first quarter of 2009 the number of transactions reduced by 31.4% compared to the same period of the previous year. This means that in the second quarter of the current year the market was not only active but also according to official data evidently got activated. And by taking into account the fact that the mortgage company started functioning from July then it becomes clear that the activation of the real estate market in the second quarter, which started in June, is not connected with that. It is also worth mentioning that the montages of the mentioned company still have low aspect ratio. According to the data if the first quarter of 2009 the amount of provided loans amounted to 90 billion AMD but the Mortgage Company has so far refinanced loans only worth of 150 million AMD. So this factor may create another wave of activation in the market. The cadastre committee hasn’t yet publicized the data of July and August. At any rate, the decrease of interest rates for mortgage loans by 2% already relives the burden of mortgagors to a certain extent. For example, when buying an apartment worth of 75 thousand USD the mortgager pays a 25.000 USD advance payment. And so the mortgager takes a 50.000 USD credit from the bank for the period of 10 years. In the event of annual 14% of interest rates the mortgagor has to monthly pay drams worth of 780 USD (interest rates plus part of the borrowed money). In the event of 12% the monthly payment of the mortgagor is 717 USD. On the one hand, this simple calculation shows that the mortgagor monthly wins a dozen of USD and on the other hand shows why the mortgage market doesn’t develop much in Armenia. A few people in Armenia can afford to monthly pay almost 700 USD a month, and in the meantime take care of food and other needs. Reminder: according to unofficial statistics, the average monthly salary in our republic is 98.500 USD (less than 270 USD). Even if the acquittal period is prolonged, let’s say 20 years, many people cannot afford to take a mortgage loan. In this case the mortgagor takes 50.000 USD from the bank and within 20 years pays back only 2.5 times more money. This means that the decrease of the interest rates by 1-2% won’t essentially change anything as long as the monthly incomes in our country equal the average salaries of the African states but the price of real estate was almost to reach the European prices.
