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Home loan interest in Lek fell again in December

2024-02-26 07:24:00, Ekonomi CNA

Home loan interest rates fell again in December and touched the lowest level of the entire year 2023. According to statistics from the Bank of Albania, the average interest rate of the loan portfolio for the purchase of housing by individuals in the Lek currency in December last year it went down to 4.85%.

This level is only 0.2 percentage points higher compared to the end of 2022. But, on the other hand, interest rates in the last months of the year followed a continuous downward trend, encouraging a significant increase in lending in the local currency.

For the entire year 2023, the new loan reached a record value of almost 319 billion Lek, an increase of 14.5% compared to 2022. It is no coincidence that the growth of the new loan came all in Lek.

Last year, the banking sector disbursed 179.7 billion new loans in the local currency, with an increase of almost 35% compared to the previous year.

In addition to new lending, Lek loan figures also include a significant amount of foreign currency loans that borrowers decide to convert into the local currency, due to the low exchange rate and more favorable interest rates.

Growth figures are even higher in the specific home loan segment. The new loan for the purchase of housing last year reached a new historical record of 48.5 billion lek or about 466 million euros.

The relatively low interest rates have caused the home loan to increase, especially in the local currency. New home loans in Lek last year reached 30.2 billion Lek, an increase of 36% compared to the previous year. Local currency credit accounted for more than 62% of new disbursements for this product.

The inhibition of the increase in interest rates by the Bank of Albania during the past year affected the correction of the extremely high growth that bond and bond yields had recorded in the second half of 2022.

Yields fell in the first half of 2023, while they were generally stable in the second half, especially for short-term instruments. This brought a direct impact on the interest of loans in Lek, which are generally quoted based on the interest of treasury bonds.

Meanwhile, the average interest rate of the home loan portfolio for individuals in the Euro currency reached 5.2% in December 2023, from 4.44% at the end of 2022.

In the Euro loan during the past year, a gradual increase in rates was observed, reflecting the monetary tightening of the European Central Bank and the increase of the benchmark indicator, the 12-month Euribor.

The difference between the average interest rate for loans in Euro and those in Lek reached the highest historical level, with 0.35 percentage points more.

However, for borrowers with income in Lek, the increase in Euro interest rates has been balanced by the devaluation of the European currency in the exchange rate. At the end of 2023, the Euro-Lek exchange rate recorded an annual decrease of 9.1%.

Historically, interest rates for loans in Euro have been lower than those in Lek, reflecting especially the lower rates applied by the European Central Bank. But last year the reports changed. The European Central Bank undertook an aggressive increase in interest rates up to the historical maximum level of 4.5%. Meanwhile, the Bank of Albania slowed growth and closed the year at the level of 3.25%./ Monitor magazine