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Credit crunch to hike loan prices in Bulgaria

increase in loan pricesThe global financial turmoil will send shock waves through the Bulgarian market as the higher cost of resources will increase end loan prices, bankers projected.
Pressure on liquidity, loan and deposit prices is expected to continue to pile up.

The crisis will hurt Bulgaria indirectly by increasing loan prices on the market, according to UBB chief executive Stiliyan Vatev.
Loan prices will increase by another 0.5 or 1.0 pct, said Postbank executive director Asen Yagodin.

Borrowing costs started to crawl up in September 2007 when the start of the credit squeeze coupled with a tightened reserve requirement of 12 compared to 8.0 pct before. Next the deepening troubles at a global level reverberated through the Bulgarian market causing several rate spikes. Banks put up interest rates in three consecutive months starting from February 2008.

New increases came in June to August with July bringing the heaviest hikes due to thinning liquidity, soaring cost of resources and risk premium levels. In addition, the Euribor and Sofibor, the Sofia interbank offered rate, moved upwards.
All these factors worked to raise the interest rate of average household home loans by 0.7 percentage points to 9.07 pct from September 2007 to July 2008.

The average rate on consumer loans crept by 1.67 percentage points reaching 11.15 pct over the same period. The rates of business loans of up to 1.0 mln euro added 1.75 percentage points to an average of 10.91 pct.

18 September 2008 - Dnevnik




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interest rates, household home loans, consumer loans, loan prices, increase, crisis


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