"First house" interest rate will stand at least 1% above that paid by the state, bank head deems

Internally, the Finance Ministry contracts loans in lei with interests of over 11 percent a year and loans from internal markets take into account the Euribor interest and the risk cost, which now stands at about 3 percentage points for Romania.

Groningen added that Romanian banks cannot influence the Euribor interest rate.

Romania's Prime Minister Emil Boc declared yesterday that 16 banks are already interested in entering the program respecting the conditions imposed by the government: a maximum advance payment of 5 percent and an interest far smaller than the current one. He added that the interest may drop even by 50 percent once the program begins, due to the competition between banks.

Banks will be selected through a bid organized by the Finance Ministry. By allotting 100 million euros, this program could help people buy their first house, the total purchasing value standing at 1 billion euros. The maximum loan guaranteed is of 60,000 euros, the average price of an apartment, mentioned Boc a few days ago.

The program was approved by the government on May 20. The state will guarantee 80 percent of the value of a loan.