Rate cuts revive markets, revitalize consumer loan, mortgage demand

Published 20.09.2019 00:14

The recent interest rate cuts by the Central Bank of the Republic of Turkey (CBRT), which allowed public banks and later private banks to slash rates on mortgages, personal loans and business credits, have revived demand for consumer loans and mortgages.

CBRT cut its key repo rate by more than the expected 425 basis points on July 25 in its first step away from the emergency stance adopted during last year's market volatilities. Last week, the bank cut the rate by another 325 basis points to 16.5%.

The first reflection of these two strong interest rate cut moves was seen in the interest rate cuts of public banks. The private banks also followed public banks in interest rate cuts in consumer, housing and commercial loans.

The effect of these interest rate cuts on the demands of individual loan users is being gradually seen. Overall, economic circles consider it a very important development that interest rates, which reached nearly 30% last year, sit currently at 16%. Bankers told the Turkish language daily, Milliyet, that although there has not been any serious activity in the market following the central bank's two interest rate cuts, the invigoration has started and the demand for individual loans and housing loans are on the rise, while the demand for commercial loans is still not strong.

Banking sector representatives stated that positive signals are coming from especially the housing, automotive and white goods industries.

The first move to confirm bankers' views was seen in the positive reflection the interest rate cut has made on the housing market.

Following the central bank's interest rate cut, banks, particularly public ones, reflected the fall in borrowing costs for their customers. They went on to cut monthly mortgage loan interest rates from 1.49% to 0.99% since the first days of August and decided to apply this rate on 180-month maturities.

Rate cuts boost

housing market

The impact was reflected in housing sales in August. Overall house sales in the country increased by 5.1% year-on-year after seven consecutive months of decline, Turkish Statistical Institute (TurkStat) data showed Wednesday, as 110,538 houses changed hands last month. Overall housing sales with mortgages, which constituted more than 30% of total sales in the sector in August, jumped 168% year-on-year, the data showed.

Bankers and housing market representatives say the real positive figures will be seen by the end of September.

All Real Estate Agents Federation President Hacı Ali Taylan said the housing market benefited from rate cuts by public banks as of August. "We expect house sales to double in October compared to August," he told Anadolu Agency (AA) yesterday.

"We expect about 50,000-60,000 mortgage loans in October," he added. Sector representatives expect housing sales to reach 1 million units this year.

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