In 2023, ANPC put the cannons on the Romanian banks for the way they collect Romanians’ installments and the back calculation system. Most of the banks were fined as a result of the controls, but the sanctions were almost entirely overturned in court, and the reasons are clear.
PwC Romania published this week an analysis starting from the method of calculating credit rates proposed by the National Authority for Consumer Protection. As a reference, ANPC would have liked each installment of a loan granted in our country to contain 50/50% interest and principal. At the moment, paying off a loan starts with an overwhelming percentage of the rate as covering only the interest and too little of the actual debt, the “principal”.
In any case, PWC concluded that, if the initiative proposed by Consumer Protection were to materialize, we would end up paying off a mortgage loan in Romania in 72 years, instead of 30 years.
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How rates are calculated in Europe, what is happening in Romania
At the level of the European Union, the method of calculating rates shows that all 15 verified states have adopted over the years the two methods of repayment of credits regulated in Romania. These are equal rates (annuities) and decreasing rates, according to the study titled ″The method of calculating the rates in the states of the European Union″, conducted by PwC. The countries analyzed were Austria, Belgium, the Czech Republic, Estonia, France, Germany, Greece, Italy, Lithuania, the Netherlands, Poland, Portugal, Slovakia, Spain and Hungary, thus covering approximately 85.4% of banking assets in the European Union. In Europe’s strongest economies, Austria, France, Greece, Poland, Portugal, Slovakia, Spain and Hungary, flat rates are the overwhelmingly practiced solution.
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It is important to note that in none of the 15 analyzed countries is the ANPC proposal practiced, the repayment method in which the principal is equal to the interest. Also, in none of the countries is the law regulating the repayment of loans, unlike in Romania. As a reference, in our country, equal rates (annuities) and decreasing rates for consumer credit are legislated.
Why the ANPC plan is wrong, a blow for Romanians
“The method proposed by the ANPC is contrary to the interests of the consumer and presents certain critical disadvantages that nullify the practical viability, the study shows. Thus, the application is impossible because it leads to infinite maturity, requiring 72 years to amortize 99.9% of the balance (300144.4 – credit balance at the beginning of the period. A 30-year mortgage reaches 72 years for amortize 99.9%, and a 4.5-year consumer loan reaches up to 45 years) for a mortgage loan and 45 years for a consumer loan. The special case of the imposition of an arbitrary time threshold (for example the enforced extinguishment of the credit after 30 years) means in practice a significant balloon payment for the consumer which can reach between 5-10% of the loan value and which does not comply with the regulations regarding the degree of indebtedness”, says the consulting company.
In practice, a consumer would be hit hard by the forced equality of principal and interest. Of course, but this means an accelerated repayment of the principal in the first periods, respectively a considerably greater financial effort. As such, credit accessibility drops considerably under the method proposed by ANPC, principal equal to interest, against the background of the increase in the first installment. In the current market conditions, a family would need a salary income of over 70% – 90% higher to access the same credit if it were repaid in the principal equal to interest method, compared to the equal installments method, according to Economedia.ro .