Romanians are avoiding mortgages in 2025 amid rising costs and stricter lending

In 2025, the Romanian mortgage market is facing a significant slowdown as many potential homebuyers hesitate to take on new loans. Despite some improvements in interest rates and banking conditions, economic uncertainty, high inflation, and stagnant wages have kept demand for mortgages at historically low levels. The reluctance of Romanians to purchase property through financing reflects broader financial concerns and a cautious approach to long-term commitments.

One of the primary reasons for the decline in mortgage activity is the high cost of borrowing. While mortgage rates have slightly decreased compared to the peaks seen in 2023 and 2024, they remain well above the levels that attracted buyers in previous years. The Romanian National Bank has made efforts to stabilize inflation by adjusting monetary policy, but commercial banks continue to enforce strict lending criteria. Many potential borrowers find it difficult to qualify for loans, particularly young professionals and first-time homebuyers who are struggling with rising living expenses.

Inflation remains another major concern affecting mortgage decisions. Although the inflation rate has shown signs of moderation, consumer prices for essential goods and services have remained elevated. The cost of housing, utilities, and daily expenses has put pressure on household budgets, making it harder for families to allocate funds for a long-term mortgage commitment. With economic uncertainty persisting, many Romanians prefer to save rather than take on additional financial burdens.

The real estate market itself has also contributed to the slowdown in mortgage demand. Property prices, especially in major cities such as Bucharest, Cluj-Napoca, and Timișoara, have remained high despite a reduction in mortgage applications. Developers have been cautious about lowering prices, anticipating a market recovery, but many potential buyers are waiting for better conditions before making a purchase. The gap between what buyers can afford and the price expectations of sellers has resulted in a stagnant housing market.

Another factor influencing the market is job security. Many Romanians remain uncertain about their financial stability due to ongoing economic fluctuations and global uncertainties. While some industries have shown resilience, others continue to experience layoffs and restructuring. For those considering a mortgage, the fear of future financial instability has made them reconsider committing to long-term loan obligations.

Banking policies have also played a role in slowing mortgage uptake. While competition among banks has led to some adjustments in mortgage rates, loan approval processes remain stringent. Higher down payment requirements and stricter income verification processes have made it harder for middle-class families to access financing. As a result, many Romanians who would have previously qualified for a mortgage are finding themselves locked out of the market.

Financial experts predict that mortgage demand in Romania may recover gradually as inflation stabilizes and interest rates decline further. However, until economic conditions improve and consumer confidence strengthens, many Romanians will continue to delay home purchases. The preference for financial security over real estate investment remains strong, and unless significant policy changes or market corrections occur, mortgage activity is expected to remain subdued throughout 2025.

Source: comp.