Loan interest rates rise, while deposits hit a 2-year low! All eyes are on the Central Bank

A new era has begun in bank interest rates in Turkey. The interest rate cut cycle, which the Central Bank of the Republic of Turkey (TCMB) initiated last year and is expected to continue this year, has led to a divergence between loan and deposit interest rates, contrary to expected outcomes. While time deposit interest rates for those with savings in banks have dropped to their lowest levels in recent years, those looking to take out loans are facing rising rates.

RAPID RISE IN LOAN INTEREST RATES

With the start of the new year, the sharp increase in loan costs has drawn attention. Average consumer loan interest rates, which had fallen to 46.37 percent in the week of December 26, jumped within a few weeks to 54.48 percent in the week of January 2 and rose to 63.53 percent in the week of January 9. When taxes are included on an annual basis, the total cost of consumer loans exceeds 80 percent. Similarly, rates for commercial loans have also increased; the average commercial loan interest rate was recorded at 53.44 percent in the week of January 2, and this rate continued at 52.31 percent in the week of January 9.

RELAXATION IN DEPOSIT INTEREST RATES

Despite this increase in loan interest rates, there is a noticeable relaxation in time deposit interest rates. Especially in the short term, the average interest rate for deposits of up to 1 month fell to 44.70 percent last week, reaching its lowest point in the last two years. The interest rate applied to maturities between 1-3 months also approached its lowest levels again at 45.79 percent. Thus, for those evaluating their savings in deposits, the real return rate has been showing a downward trend for some time.

EXPERT EVALUATIONS AND THE IMPACT OF INFLATION

Experts emphasize that year-end balance sheet adjustments, loan growth limits, and banks' risk premiums and profit margins are directly reflected in interest rates. The timing of how loan and deposit interest rates are affected by changes in the policy rate continues to cause uncertainty. On the other hand, the gap between loan interest rates and inflation data has widened. While the annual inflation rate for December announced by the Turkish Statistical Institute (TÜİK) was 30.89 percent, the TCMB's year-end 2026 inflation forecast stands at 16 percent. However, the fact that loan interest rates remain well above these figures indicates that real interest rates in the market remain high.

ALL EYES ON THE MONETARY POLICY COMMITTEE MEETING

The first Monetary Policy Committee meeting of the year, to be held on Thursday, January 22, is being closely followed by all bank customers and investors. Market expectations are for the TCMB to cut the policy rate by around 150 basis points, bringing it below 38 percent. It is observed that the annual compound equivalent of the policy rate, which was lowered to 38 percent last month, is approximately 46 percent.

EXPECTATIONS FOR LOAN INTEREST RATES

When banks will implement the expected cuts in loan interest rates following the decline in deposit interest rates stands out as the topic that both individual and commercial customers are most curious about in the coming period.

News Source: 12punto