Why Fall 2011 - not the best time to design long-term loan, writes Prostobank consulting.
Related article: Mortgage, which can not giveThe first reason: the possibility of a new financial crisis
Experts agree that the advent of a new financial crisis is inevitable. Moreover, if the summer of 2011 the specialists of investment companies believed that the default of Greece, which could be the beginning of the crisis will not happen, the country eurozone would not allow such an outcome event, and the main hopes were pinned on a program of debt restructuring, as early as October, experts are not so optimistic in their predictions: Greece defaulted call irrevocable, and fully anticipated event.
Projections diverge only on how the coming crisis will occur and what will the consequences. But in any case, the crisis brings uncertainty and higher risks for the borrower.
The latter include the sharp rise in prices, and possible loss of job or reduction in wages of workers in certain industries, and the inability to withdraw funds from bank accounts.
By the way, during the 2008 crisis had the most difficult to precisely those Ukrainians who were in arrears to the bank, especially in foreign currency and on mortgages. Many of them still can not fully pay off old debts.
Reason Two: still high interest rates on loans
Despite the fact that average rates on most types of credit, except mortgage loans in the primary market, gradually declining, today they are still guaranteed borrower significant overpayment of the loan.
For example, the average real rate on loans for new cars by research firm "Prostobank Consulting" in October of 2011 from 13.8% to 15.92% per annum at different stages. As a result, the loan for car $ 15 thousand dollars or 120 thousand hryvnia with an initial payment of 30% of its value and term of five years, the borrower overpay an average of more than 38 000 hryvnia.
Buying an apartment is worth 70 thousand dollars on the secondary market loans for ten years, a borrower with an initial payment of 30% overpay more than 56 thousand dollars, or about 450 thousand hryvnia.
Accordingly, if the loan can not be avoided, the borrower would be appropriate at least delay the loan for several months - during which time rates will be slightly lower, and the borrower will be able to increase the amount of their savings for a down payment, thus reducing future overpayments.
Reason Three: rising interest rates on deposits
According to research company "Prostobank Consulting" in August and September 2011, the average of market rates for deposits in the national currency of Ukrainian banks grew by 0.1-0.5 percentage points in August and 0.3-0.6 percentage points in September.
For those wishing to open a deposit that is good news, but for potential borrowers is not the case. After raising deposit rates means an increase in value of the resources attracted by the banks.
So, increase the size of floating rates offered by many banks for loans, particularly loans for long periods. Indeed, often the base floating rate deposit rate acts of either the bank loans or the market average rate on deposits for a fixed period. So, the increase in deposit rates may lead to a gradual increase in the cost of credit to the borrower during the term of the loan agreement.
Of course, it is unknown how long to continue upward trend in deposit rates. Perhaps it will be short and will not lead to a substantial increase in the price of credits. However, while such a trend exists, with registration of loan is better not to hurry.
On the other hand, a temporary increase in deposit rates a potential borrower can use to their advantage. Namely - to accumulate a down payment on the loan. If you already have a certain amount for a down payment on the loan, then placing it on deposit with the grown rate, you can reduce the amount of future credit, and hence the overpayment on it.
Reason Four: decline in property prices
In a period of rapid growth in property prices was profitable mortgage lending to borrowers. After all, more expensive apartments, associated with the overpayment of the loan, was much lower than the market price of housing increased during the same period. In autumn 2011 the situation in the real estate market is another: cost per square meter of housing in Ukraine is slowly "drifts" down.
Since the beginning of 2011 the average price per square meter of residential real estate in Kyiv fell by almost 3%. And although every now and then, realtors say property prices have reached a minimum and will soon go into growth, the prerequisites for that are not observed, because the proposal on the residential property market is many times the effective demand.
And it is not surprising, because under the current income housing even Ukrainians "Khrushchev" development for most of them are unavailable. And as a radical increase in incomes of potential buyers in the near future can not be expected, the sellers will have to somehow reduce the prices that they are little and do.
In the end, if this trend will continue and intensify, the potential buyers would be better to save for an apartment than a loan. Indeed, in this case, to accumulate the required amount, he can much more quickly than repay the loan, not to mention the lack of an overpayment.
For example, when buying an apartment on credit worth 70 thousand dollars with an initial payment of 30% for the term of the loan 10 years and the average rate on such loans at 16.3% APR the borrower will have to pay a monthly payment of about 7040 hryvnia, or about $ 880. At the same time with a decrease in property prices by 4% per year over four years, the same apartment would cost about 60 thousand dollars.
Putting aside the same $ 880 per month, the borrower over four years will be able to accumulate 42 240 dollars. Adding to this sum has accumulated less than 30% of the price or 23 thousand dollars, he will have more than 65 thousand dollars, and be able to buy the same apartment without the help of a loan.
By the way, the automotive market is experiencing a completely different situation. It is increasingly heard threats of increased duties on foreign cars, which the latter can grow by almost 40%.
Of course, in making such a loan to buy a car may be advantageous to the borrower if he expects that the overpayment of the loan is less than 40% of the value of the car. But so far these promises have remained only theoretical, and if it comes to the practical raising taxes - is still unknown.
Reason Five: the unpredictability of the economic situation
In addition to the instability in the global economy, the financial condition of borrowers affected by the Ukrainian and the economic situation in the country. And she is today without the crisis remains highly uncertain and difficult to forecast. For example, no one can more or less clearly defined the future of the hryvnia. For the borrower, burdened with large long-term credit, the same can be dangerous as the devaluation, revaluation and the hryvnia.
The first face higher prices and cost of living, resulting in the borrower will be difficult to repay the loan. In the second case the borrower keeps the money in foreign currency might lose due to changes in the course much of his reserve, and in the case of financial difficulties to repay the loan for it will be difficult.
In addition to playing against the borrower increase in food prices, utility costs, gasoline, and the like, the level of growth which is also difficult to forecast. Of course, these figures in our country have always been very difficult to predict, but given the forecasts of a new financial crisis (see first reason), the fall of 2011 to build predictions particularly difficult. One thing is certain - lower prices will not be exact.
And besides, do not forget also that the use of credit has become perhaps the main cause of the crisis of 2008. Therefore, entering into the loan in autumn 2011, you may make your contribution to the approximation of the next crisis.