What will be the interest rate on loans in 2021?
Tihomir Toshev: “Interest rates will remain at last year’s levels. Interest-free loans as an anti-crisis measure are a good alternative to quick loans,” the credit consultant pointed out.
This year, interest rates on loans will remain at the levels of last year – 4.5% to 6.5% for consumer loans and around 2.5% to 3-3.1% for mortgages. This is what Tihomir Toshev, Credit Consultant and Executive Director of Credit Center, predicted for BNR.
“It is still too early to talk about interest rate hikes. I am one of the optimists who think there will be no increase this year. After the end of the moratorium on prices, some of the loans on which payments are currently deferred, and they are a little over 7 billion – of households, will inevitably become “bad loans”, because some people have remained permanently unemployed” , commented the expert.
He emphasized that the liquidity in the banking system is increasing and deposits are already over BGN 60 billion.
“At the same time the loans given to the population are a little over BGN 25 billion.
“You see how much more we save compared to what we take out as loans,” Toshev calculated and confirmed that this is what all Bulgarians who continue to work and have not lost their jobs and income do. “They continue to save and accumulate deposits despite the 0% interest on them, which means that the system will continue to be quite liquid.” Banks will have a lot of money, which they still have to give out as loans,” he commented.
However, Toshev is of the opinion that the demand for consumer loans will be limited. He announced that 2020 ended with an annual growth in consumer loans of about 6%.
“Fewer people dare to go into debt at a time like this,” he noted, but he believes there is, on the other hand, “light at the end of the tunnel” due to vaccination.
According to him, despite the growth in consumer loans, last year there was a big drop in loans below BGN 10 000, and the explanation is the opportunity to take out interest-free loans due to the pandemic.
Tihomir Toshev defined this anti-crisis measure as “a pretty good alternative to quick loans, which people usually resort to when they are left without income or with insuffcient income”, and quick loans remain the most expensive credit product on our market.
Toshev pointed out that the real estate market is not affected in terms of pricing by the corona crisis nor in terms of increased interest in mortgage loans. The credit consultant expects mortgage market to report a growth of 13% compared to 2019. This, he said, resulted from the “reasonable behavior of the banks”, which did not change their terms, as well as the stable property market, keeping demand levels high.
Tihomir Toshev does not expect a serious change in inflation this year. “The economy will begin to recover more slowly than expected, from the middle of this year. Especially in lending, I expect it to end up with small growth: within 3% to 5% in consumer lending compared to 2020 and around 8-9% in mortgage lending,” he predicted.