PERFORMANCE OF THE VARIABLE RATE MORTGAGE AND THE BULGARIAN INDEXED CAPPED CREDIT

R. Marisol Ravicz

Review of Urban & Regional Development Studies, 1993, vol. 5, issue 1, 115-132

Abstract: For countries relying on variable†rate, equal monthly installment mortgages, periods of high or unstable inflation can decimate loan affordability and profitability. The Bulgarian Indexed Capped Credit (BICC) can protect bank returns and radically improve loan affordability. Nevertheless, the instrument has a significantly higher credit risk than a fixed rate mortgage. Using Bulgaria as a model, this paper will review the BICC's benefits for borrowers and lenders. In addition, it will examine the instrument's credit risk and explore one option for reducing that hazard. Finally, this report will examine briefly liquidity risk, consumer acceptance and servicing issues.

Date: 1993
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https://doi.org/10.1111/j.1467-940X.1993.tb00126.x

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