General trend in rates is downward
The overall downward trend in deposit and loan rates continued last week. However, there was an increase in commercial loan rates as an exception to this general trend. The most noteworthy development was in consumer loan interest rates. They were below 30 percent for the first time since August 17, 2018. As of January 18, interest for consumer loans was 29.99 percent. Just like a price tag.
Yet this rate does not belong to a single bank. If we were writing about the rate of a specific bank, a price tag-like rate would be speculated. However, the data we are quoting shows the average rate of all banks. So we have to say that 29.99 percent is an interesting coincidence.
The average interest rate of consumer loans decreased by a total of 2.76 percentage points in a week. What happened? Was it a magical hand that conjured such a significant decline in a week? Yes, it’s a magic touch. This touch is the practice of liquidation of credit card debts. The fact that Ziraat Bankasi started to cover the credit cards of all banks is the main reason for this reduction in interest rates. Ziraat Bankasi is opening low interest credit to borrowers while clearing their debts. This low interest rate credit has led to a 2.76 percentage point reduction in consumer loan rates.
The interest on consumer loans came in at 29.90 percent on August 17, and climbed to 39.36 percent on October 12, rising close to ten points in two months. The consumer loan interest rate, which formed a bell curve over this five month period, declined to 29.99 percent as of January 18. According to the average of all banks in the January 11-18 week, the rates of car and mortgage loans also decreased.
According to Central Bank data, commercial loan rates increased in the week of January 11-18. The increase was also observed in all currencies. The continuation of the increase shows that the demand for foreign currency-denominated loans is increasing and that foreign exchange is expensive to obtain for the banking system. But we have to wait for a while to monitor whether this trend will continue or not.
Interest rates on deposits continue to decline as expected. As of January 18, interest on TRY deposits is almost two percentage points lower than last year’s end. The trend is downward in deposit rates. It will not be surprising that this decline continues until at least the elections.