Bulgaria's FIBank offers mortgages to foreigners

The Sofia Echo, 4th September 2006

Bulgaria’s First Investment Bank (FIBank) said on August 28 it had launched a service for extending mortgage loans to foreign citizens.

Theese loans, which are for up to 20 years, have a floating interest rate of 6.9 per cent for the whole period. The interest goes to 8.4 per cent with downpayment between 20 and 30 per cent.

FiBank has become only the third bank in Bulgaria, after DSK Bank, owned by Hungarian OTP, and Bulbank, the local arm of Italy’s UniCredit Group, to start offering mortgage loans to foreigners to support purchases of Bulgarian real estate.

The move is considered by most Bulgarian banks on one side as risky because of the inability of some of them to check the credit record of a foreigner. Others believe it is inefficient to offer mortgage funding to western Europeans since the interest rates in Bulgaria are higher than those in most other European countries.

According to Jonathan Harfield, chief executive director of FIBank, however, offering lending to foreigners should be a normal move for any Bulgarian bank.

“If foreign people wish to buy property in London, Paris, New York or Lisbon or anywhere else, it is not difficult by any means to get a local bank to finance a mortgage. This is a normal business transaction. The passport somebody holds does not determine whether they are creditworthy,” Harfiled said in an interview with The Sofia Echo on August 28.

He believes that the fears of most of the local banks are unjustified.

“It is possible to do basic background checks on foreigners. You can check if someone is registered or delayed with their credits whatsoever,” he said.

So, it appears that this is not a problem. Furthermore, what FIBank is offering is secured lending, where an individual’s financial circumstances are slightly less important than if the lending is unsecured, Harfield said.

“Yes, the interest rates in Bulgaria are higher, but then you are acquiring an asset in a country, which is still regarded as having slightly higher political and economic risk than, let us say, the UK or Germany. Therefore, you will also pay a slightly higher interest premium,” he said, commenting on the difference in interest rates between Bulgaria and most of the other European countries.

In Harfield’s view, a person may take the view that if he or she wishes to balance the risk of his or her overall lifelong investment portfolio, he or she has an asset that is mortgaged in Bulgaria and it is less risky and less costly for the portfolio than borrowing for a principle private residence in the UK, for example.

“There is a general view in the UK that the sterling will appreciate against the euro. And so people would prefer to have a euro loan and have sterling income, rather than to take a sterling loan and convert into a euro asset,” Harfield said.

He said that Bulgarian banks should change their view of foreign customers.

“You cannot have a trace of xenophobia or a trace of skepticism about foreign businesses if, as a country, you are trying to enter one of the world’s largest business clubs. Bulgaria at the moment is at a very advanced stage of entering the European Union. You cannot say that foreigners are too risky,” he said.

FIBank is the biggest among the few domestically owned banks in Bulgaria. It is 63.66 per cent controlled by two Bulgarian businesspersons, Tseko Minev and Ivailo Moutafchiev.

FIBank ranked as the sixth largest bank by assets in Bulgaria at the end of 2005.

The bank has about 100 branches throughout Bulgaria, a branch in Cyprus, a branch in Albania’s capital Tirana and an office in Durres, in western Albania.





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