Boost for new homebuyers

A new state-run credit agency has already helped more than 1,600 young people buy their own homes.

The Credit and Export Guarantee Fund, also known as KredEx, has issued twice as many guarantees for residential mortgages in 2002 than during its first two years of operation, officials said.

Under the aegis of the Economic Affairs Ministry, KredEx supports house buyers by providing additional guarantees to back up those from other financial institutions, making it easier for Estonians under 35 to get affordable mortgages.

KredEx works with banks and leasing companies and uses a basic insurance scheme that partially covers the risks of a certain deal, be it a loan or an export guarantee.

The fund has a portfolio of about 2 billion kroons (12.5 million euros) and is ready to provide about 1 billion kroons' worth of guarantees for residential mortgages.

Candidates for KredEx loans must be employed and hold a university or vocational school degree.

The standard package requires borrowers to use the purchased property as the main guarantee and any additional assets that may be necessary depending upon the amount of the loan. The borrower's income and current liabilities contribute to the final interest rate that starts from 8 percent.

KredEx spokeswoman Maris Heinaru said some 60 percent of young families getting a bank loan prefered to buy a flat, while others wanted to buy or build a house.

Tallinn residents received more than 30 percent of the guarantees issued this year to young families and 59 percent of those for singles.

A recent price hike in the real estate sector has been matched by increases in the sums being lent. The average mortgage for families grew from 215,000 kroons in 2001 to 335,000 kroons this year.

KredEx also helps refinance existing residential mortgages.

Hansapank has issued two thirds of the residential mortgages backed by KredEx. Through June, the bank has given out about 2,800 residential loans partially backed by KredEx.

Hansapank spokeswoman Kristiina Tamberg said the cooperation with KredEx had been going well. "In the near future we might introduce changes to the existing packages to make them more favorable," she said.

Triin Messimas, residential mortgage package developer at Eesti Uhispank, the country's second largest bank, said KredEx' help has been crucial for the introduction of favorable loans.

"Without KredEx we would require house purchases to be 15 percent self-financed. And that would be a minimum rate few would qualify for," she said.

Eesti Uhispank was the first to introduce a mortgage loan for young people without obligatory self-funding last summer and with KredEx's help has issued 900 loans worth 240 million kroons.

"Most of the people applying for residential loans would never get them without KredEx," said Messimas.

"Our new target group is tenants of property that has been denationalized, who are forced to move out by the owners."

The fund has issued more than 4,700 residential loan guarantees as of Aug. 8 - of which 11 turned out to be problematic - and has increased its liabilities by 309,000 kroons.

KredEx plans to use 6.4 million kroons of its profits earned in the first half of 2002 to extend the loan guarantee programs without resorting to the national budget.