The Justice and Development Party's (AK Party) regaining of single-party rule has positive implications for the real estate sector, which is considered as a key driving force of the economy. The Turkish Economy Bank (TEB) unveiled an interest discount for mortgage loans and decreased 120-month-term mortgage interest rates from 1.29 percent to 1.10 percent. Other banks are also expected to reduce interest rates applied to housing loans. As the Central Bank of the Republic of Turkey (CRBT) has reduced funding costs recently, banks, which are not experiencing any difficulties borrowing from international markets, are expected to continue giving interest rate discounts in the months ahead.
The four elections Turkey experienced since March 2014 and uncertainties in global markets led to a decline in mortgage interest rates, which rose to 14 percent after the June 7 elections from 8 percent in May 2013. AK Party single-party rule and the stability it should bring are expected to give impetus to investments in the construction sector. The banking sector is supposed to contribute to this upward trend by unveiling rate cuts for mortgage loans.
According to CRBT data, banks' total housing loan volume has stood at TL 129.5 billion ($45.6 billion) since Oct. 23. The rise in mortgage loans over the past five weeks remained at 5 per thousand because of political instability. Housing loan volume, TL 114.4 billion at the end of 2014, declined to TL 110.5 billion by Oct. 24. It has grown by 17.2 percent over the past year. Turkish Statistical Institute (TurkStat) data reveals that a 92,483 houses were sold in September 2015, marking a 20 percent fall compared to the same month last year. The rise in interest rates, which was the result of political uncertainty and global liquidity conditions, caused mortgage loans to plummet by 33.5 percent to 28,684.
Gökhan Mendi, a senior executive vice president in TEB's private banking department, said a bank could create different payment schemes in line with all clients' solvency. Underlining that the primary objective of a bank is to offer loans with affordable payment plans to all clients, Mendi stated that his bank offers housing loans with a 1.10 percent interest rate to all customers. In addition to reducing interest rates, TEB also enables its customers to receive loans in just a few hours provided that they submit credentials on time.