Archive for March 4th, 2012

h1

Another good idea but with no clear implementation policy

March 4, 2012

You know how I continually highlight the Ukrainian government spouting numerous good ideas as solutions for numerous obvious problems but failing because would would be effective policy falls short on the means of implementation?

Well here is yet another good idea that will undoubtedly fail through ineffective implementation and result in being a government statement that will be counterproductive.

The Prime Minister has announced that Ukraine will introduce a 30 year mortgage at 10% interest in order to stimulate the housing market.

Now for many readers, you will think there is nothing special about that.  However you should be aware that mortgages spread over 30 years in Ukraine simply do not exist and have never existed.  A Ukrainian would do exceptionally well to find a mortgage that runs over half that time.  More often than not it is for a period of 10 years or less.

The interest rate of 10% is also unbelievably low for Ukraine.  Standard borrowing rates are typically 21% to 27% – I kid you not!

So, how will the Prime Minister, having made this statement, create a system where banks are offering 30 mortgages at 10%?

Create a Freddie Mac or a Fanny Mae?  Forcing private banks such as OTP, Aval, Alpha, Delta, Pump, Privat et al seems very unlikely.

He is undoubtedly right that banks offering such terms would stimulate the housing market and construction industries, but how is he going to achieve them doing so?

%d bloggers like this: