Credit interest rates still “stubborn”

Dünya Executive - - COMMENTARY -

We can’t avoid this increase in credit rates. Private banks already “don’t obey” political demands to lower rates but obviously, public banks can’t be influenced neither.

On top of that, credit interest rates can’t even remain steady; they are still on the rise. It would be understand­able that private banks don’t obey the calls to cut rates. But public banks should have been able to obey the commands, right?

Can a company survive if it sells a good for less than its cost? The banks’ basic resource is deposits - your money and my money. This money sits in banks’ safes for safekeepin­g. The banks’ task is to give this money back with its promised interest and to make more income to be able to pay that interest, hence to survive as a business.

But what happens when a bank runs the deposits – which it obtained with an interest of 10 percent - with an interest of 9 percent?

I can already hear some readers objecting: “Banks can pay an interest rate of 7 percent in place of 10 percent for the deposits and sell it with 8 percent. Thus credit rates can be cut.”

It sounds good, but would capital owners – in other words, savers – put their money in the bank with an interest rate much lower than inflation – as in the example at a rate of 8 percent?

Banks would have long cut rates down to 8 percent if they knew they would be able to collect deposits. But what if money doesn’t flow and the wheels stop spinning?

The trend of cred t rates

The one-week repo chart indicates that credit interest rates are in an upward trend. The latest figure released is from March 9 and the consumer loan credit rate by that day drew near 20 percent once again. The consumer loan credit rate increased by a half base points when compared to the end of 2017.

The fastest rise is in vehicle loan credits but taking into considerat­ions that the rates on vehicle loans were low in the last week of last year. Vehicle loans soared by 2 points in the first week of 2018. Hence, it’s healthier to compare the rates with the first week. Accordingl­y, vehicle interest rates increased by a respectabl­e rate of 1.86 percent.

Mortgage loan credits increased by one point as of March 9. We saw the consequenc­es on February housing sales figures – a 5.4 percent decrease compared to the previous year.

The modest year-to-date rate increase among major credit types was commercial credit rates, with a credit rate of just 0.15 percent.

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