Following a policy overhaul that saw the central bank almost double its key rate last week, consumer and housing loan interest rates at Turkish state banks have surged, while private lenders have begun making limited consumer loans as regulations are eased.
The Central Bank of the Republic of Türkiye (CBRT) raised its benchmark annual rate to 15% from 8.5% on June 22 and described the move as the “first step” in a tightening process that would continue until there was a clear improvement in the inflation outlook.
State banks raised their monthly interest rates on housing loans of up to TL 500,000 ($19,000) to 1.99% on Tuesday from a previous 1.39%, according to rates published on their websites.
Some state banks hiked the rates on housing loans of TL 2 million and more to 2.4% per month and some have lifted their consumer loan rates to a monthly 2.64% from 1.89%, their websites showed.
One banking source said lending remained limited in state banks even with higher rates.
After the rate hike, the central bank also began rolling back parts of the dozens of rules and regulations it had adopted since 2021 that were, among others, meant to encourage Turkish lira holdings.
Private banks have begun to issue personal loans after lending came to a virtual halt due to those regulations, including the compulsory holding of securities.
The uncertainty around May’s parliamentary and presidential elections also contributed to a freezing of personal loans by private banks.
“We see the loan market, which was virtually closed before the election, is starting to reopen,” said another banking source.
Some banks have started to issue personal loans of more than TL 70,000 with a monthly rate of 5%, while housing loan rates have risen above a monthly 3%, bankers said.
Bankers said there was some return to revolving credit and away from spot loans as a result of the policy simplification moves.
But bankers said a rise in the central bank’s ceiling rate for commercial loans was not sufficient for banks to further open credit channels and called for this limit on loan rates to be abolished.
The central bank has said it will continue to tighten its monetary policy until the inflation outlook improves.
The annual inflation dipped to 38.21% in June, official data showed Wednesday, from 39.59% the previous month.
Compared with a month earlier, prices increased 3.92% from May to June, its highest level since January, after a steep decline in the lira following the elections.
