Turkish banks hike consumer and housing loan rates

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Consumer and housing loan interest rates at Turkish state banks have surged after the central bank almost doubled its key rate last month, while private banks have begun making limited consumer loans as regulations are eased.

The central bank raised its key annual rate to 15 percent from 8.5 percent on June 22 and described the move as the “first step” in a tightening process that would continue until there was a clear improvement in the inflation outlook.

State banks raised their monthly interest rates on housing loans of up to 500,000 lira ($19,000) to 1.99 percent on Tuesday from a previous 1.39 percent, according to rates published on their websites.

Some state banks hiked the rates on housing loans of two million lira and more to 2.4 percent per month and some have lifted their consumer loan rates to a monthly 2.64 percent from 1.89 percent, their websites showed.

One banking source said lending remained limited in state banks even with higher rates.

Regulations eased

After the rate hike, the central bank also began rolling back parts of the dozens of rules and regulations it had adopted since 2021 that left debt, credit and forex markets heavily state managed – and that were meant to encourage lira holdings.

Private banks have begun to issue personal loans after lending came to a virtual halt due to those regulations, including the compulsory holding of securities.

The uncertainty around the results of May’s parliamentary and presidential elections also contributed to a freezing of personal loans by private banks.

“We see the loan market, which was virtually closed before the election, is starting to reopen,” said another banking source.

Some banks have started to issue personal loans of more than 70,000 lira with a monthly rate of five percent, while housing loan rates have risen above a monthly three percent, bankers said.

Bankers said there was some return to revolving credit and away from spot loans as a result of the policy simplification moves.

But they added a rise in the central bank’s ceiling rate for commercial loans was not sufficient for banks to further open credit channels and called for this limit on loan rates to be abolished.

The central bank has said it will continue to tighten its monetary policy until the inflation outlook improves. Turkish annual inflation stood at 39.59 percent in May and data for June, scheduled for release on Wednesday, is expected to show monthly consumer price inflation of 4.84 percent for an annual rise of 39.47 percent, according to a Reuters poll.