Analysts warn against hike in social mortgage rates

A raise in interest rates on social mortgages that aim to provide affordable housing to citizens would be unacceptable and bring about an end to the concessional mortgage system in Azerbaijan, local analysts have warned.

The State Mortgage Fund, a body in charge of such allocations operating under the central bank, has offered to raise the rates from the current 4% to 7% to increase its charter capital. But experts from the Economic and Social Development Center said higher interest on social mortgages would be in blatant contradiction to their purpose of helping low-income families. For instance, citizens borrowing 35,000 manats ($41,600) for 30 years with the 7% interest rate are required to pay 230 manats per month ($273) and their monthly income should be therefore no less than 350 manats ($416). However, given that the average wage in the country is 200 manats ($238) and the minimum wage stands at 60 manats ($71), not many would afford to make monthly payments under the loans.

Social mortgages worth up to 35,000 manats are allotted for three to 30 years. The interest rate for regular loans is 8%.

Mortgage loans, which are disbursed through over 20 crediting organizations, aim to help solve the housing problem of military men, those holding science degrees and other citizens.*