Despite interest rate cuts, banks are raising loan rates! 'We haven't made an inch of progress'
Despite interest rate cuts by the Central Bank, banks continue to raise consumer and deposit interest rates. Banks, seeking to control foreign currency demand, are unable to reflect the rate cuts onto deposits.
12punto
The Central Bank (TCMB) lowered the policy rate to 39.5 percent with a 250 basis point cut on September 12 and a 100 basis point cut on October 24. However, these cuts could not stop the rise in consumer loan and deposit interest rates. Banks preferred to increase loan interest rates rather than lower them. The average consumer loan interest rate, which was 58.15 percent on September 26, rose to 62.74 percent last week.
In June 2023, when the economic management changed and Mehmet Şimşek took office as Minister of Treasury and Finance, the average consumer loan interest rate was at the 40.1 percent level. The situation is more stagnant for commercial loans; commercial loan interest rates were recorded at 52.55 percent in the week of October 17. This rate remained close to the 52.85 percent level seen on September 26. In June 2023, commercial loan interest rates were at the 21 percent level.
According to a report in Sözcü, an increase is also being observed in deposit interest rates. The 1-3 month term deposit interest rate rose by 32 basis points last week to 50.14 percent. While banks usually reflect interest rate cuts onto deposits quickly, this time they have acted more cautiously. Analysts state that the rise in gold prices has increased foreign currency deposits and that banks are forced to raise interest rates to protect their share of TL deposits.
"WE HAVEN'T MADE AN INCH OF PROGRESS."
Economist Emre Alkin, in a social media post, stated: “I just received a message: ‘Welcome interest rate 47 percent’. At first, I thought it was déjà vu. Then I looked, the same message came last year with the same rate. We haven't made an inch of progress. What a program it is!”
The expected interest rate drop for credit cards and overdraft accounts (KMH) did not materialize. The interest rate cut made by the TCMB in October did not create changes in these areas. It is stated that the policy rate needs to fall below 35 percent. In the regulation made at the end of September, the contractual interest rate was reduced from 4.75 percent to 4.50 percent, and the late payment interest was reduced from 5.05 percent to 4.80 percent. However, this decrease was found insufficient, especially by citizens under a high debt burden.