Lending more accessible but deposit yields decline

Lending to businesses and households in the country was more accessible at the end of April 2012 than a year earlier, Bulgarian National Bank (BNB) data showed. Corporate credits became 0.15-2% cheaper, the highest decline in interest rates being registered by loans exceeding €1 mln. The only exception were Euro-denominated credits of up to €1 mln which reported a 0.42% increase of the interest rate on an annual basis to 8.38%.

At the end of April 2012, households also received cheaper loans by banks. Interest rates on consumer credits in Bulgarian currency and in Euros decreased by 0.69% and 0.12%, respectively. People who decided to buy a home or just mortgage a real estate also got better deals, BNB data showed. According to experts, the decrease in interest rates was not big, but the average levels of mortgage interest rates ranged from 7.65% for Euro-denominated loans to 7.84% for these contracted in Bulgarian currency.

However, a downward trend was registered not only in interest rates on loans but also on deposits. At the beginning of the economic and financial crisis, banks in Bulgaria increased dramatically interest rates on both corporate and household deposits due to the highly limited external financing. Three years later, financial institutions have sufficient liquidity which they are not able to market because of the shrinkage in consumption and this is evident from the statistics of the central bank. According to BNB data, at the end of April, interest rates on new corporate deposits denominated in Euros fell by almost 1% to 2.53%. Households – the most active savers – currently get considerably lower yields from their deposits - an average interest rate of 5% on deposits in Bulgarian currency, or 0.54% lower than April 2011 and 4.55% on Euro-denominated savings, or 0.29% less than a year earlier.

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