Romanians reject euro home loans after Hungary disaster

[BUCHAREST] Romania, using record-low interest rates to rebuild a housing market devastated by the economic crisis, is forcing homebuyers such as Vlad Popescu to abandon cheap euro-denominated mortgages in the name of financial stability.

In October, the government changed the terms of a four-year-old programme for euro loans to cover credit only in the Romanian currency, the leu. In the following months, banks, led by Erste Group Bank AG's Banca Comerciala Romana SA and BRD-Groupe Societe Generale SA, accelerated leu mortgage lending. It grew at a record annual pace of 90 per cent in December.

Romania is providing US$4.2 billion in loan guarantees to first-time homebuyers such as Mr Popescu. The government is betting that borrowers in the European Union's (EU) second poorest country will accept higher payments in exchange for local currency loans that won't jump in cost if the leu plunges against the euro. In Mr Popescu's case, it's working.