Fewer loans for homes, more loans for consumption

In the past, the number of people who applied for loans with the aim of buying a home was significant. But now, this desire seems to have reduced in meeting our day to day wishes, such as the purchase of a car or paying for a holiday. “I wanted to spend good holidays somewhere and this is why I was very eager to head to the bank and apply for a loan. I managed to obtain 2 thousand euros”, says for Albanian Free Press the 32 year old Arber S.  He adds that he spent this money with his wife in Albania. They even paid off some outstanding small debts with them. This is only one case of what are considered to be as consumer loans and which, according to the Bank of Albania in its last report, they have exceeded the level of home mortgages. The level of consumer loans have gone up by +30% this year, while the level of mortgages has dropped by -4.9%. There are even other cases with more specific arguments on the concept of “consumption”, which individuals submit to bank experts in order to obtain a loan.

“How could I not celebrate my daughter’s birthday? Her tenth birthday meant so much to me. This is why I obtained a 700 thousand ALL loan to make this come true”, says Migena Gj.

Then, there is an even more interesting testimony offered by a girl initialed M.I, who has managed to obtain a 2 million lek loan in a bank to pay her lawyer in a lawsuit.

All of these cases seem to fall under a category that banks consider as arguments “to meet needs”, as opposed to the arguments “to improve living standards”. In total, they appear to be factors which have had an impact in the growth of consumer loans.

According to the figures provided by the Bank of Albania, these arguments have led to a 17.4% increase in the level of this category of loans, as opposed to a 5.4% influence exerted by the need to go to a bank and fund the purchase of a home. This shows that consumer needs, whatever they are, seem to have turned into a priority for individuals, to perhaps postpone the dream of purchasing a home for a later period.

Figures confirmed by the Bank of Albania indicate the constant drop of the demand of individuals to obtain a bank loan for the purchase of a home, while their demand for consumption loans is increasing

Banks are more lenient in offering consumer loans

To obtain a loan for the purchase of a home seems to be more difficult than to obtain a consumer loan. This is confirmed by the Bank of Albania, according to which, the criteria that commercial banks operating in our country apply in offering consumer loans are fewer in number as of the beggining of this year. “Criteria became fewer more lenient for both consumer loans and mortgages, however, the conditions applied for the latter are still more rigorous”, experts of the Bank of Albania say in regards to this phenomenon.

They also add that in general, criteria for individual loans have seen a reduction in number in the first quarter of this year. For the second quarter of the 2017, banks are expecting mortgage loan criteria not to change, while those for consumer loans to be more lenient.

CONFIDENCE DROPS

Fall of confidence by individuals on the economy seems to have been one of the main factors to have a negative impact on the demand for individual loans. “The presence of alternative sources, consumer confidence and the developments in the real estate market have had a negative impact on the demand for individual loans”, experts of the Bank of Albania state in their latest report. Meanwhile, we need to stress that this institution concluded that individuals have less confidence on the economic developments in the country as opposed to businesses, which appear to be more optimistic than them.

Observation, it’s easier for individuals to obtain a loan

 Individuals have an easier job to obtain a bank loan than businesses. This is confirmed by the latest observation that the Bank of Albania has carried out in regards to the crediting activity in general for the first months of this year. “The results of the observation seem to indicate more rigorous standards applied for crediting businesses and more lenient standards for crediting individuals, in line with the expectations of last quarter”, the report states. On the other hand, “demand for loans in the first quarter of 2017 saw an increase for both businesses and individuals”.

Meanwhile, as far as expectations for the coming months are concerned, this observation states that criteria for offering loans to businesses will become more rigorous, but this will not be the case for individuals.

“Banks are expecting more austere criteria to apply in terms of business loans, while for individuals, these criteria will be more lenient during the second quarter of 2017. For businesses, the most rigorous criteria will be applied to large enterprises, while for individuals, banks will be more lenient in terms of consumer loans”, the Bank of Albania says.

Meanwhile, demand for loans is expected to grow, for both businesses and individuals alike.