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The Bulgarian National Bank announced a basic interest rate of 1.42 percent, starting from January 1, 2023.

"Higher interest rates are waiting for us. We saw that in the USA they reached 4.6%, they are expected to reach 5% because of stubborn inflation. Here, loan interest rates are very closely related to deposit interest rates, as many of the banks set prices loans based on the monthly statistics of the average price of borrowed funds in banks, which are deposits. The interest rate on mortgage loans is expected to jump to 3-4%," said the Deputy Chairman of the Association of Credit Intermediaries in Bulgaria Deyan Vassilev in the "Bulgaria morning" studio.

According to him, there is currently an interesting economic paradox in Bulgaria.

"The main interest rate, one and a half percent, the BNB increased it, the European Central Bank - as well, and the interest rates on our deposits continue to remain unchanged. The question is when the banks will start raising interest rates on deposits, or how long they will be so inert. The economic logic dictates that the lowest-risk asset in an economy is the prime rate. Deposit rates must start to rise, and then this mechanism is transformed to the cost of loans - those currently withdrawn and newly issued." , Vassilev added on the air of Bulgaria ON AIR.

He explained that

until the end of last year, credit levels in our country remained record high

.

"It's been a record year for home loans, consumer loans. Property prices have also jumped a lot. Savings in banks have also increased and people are very conservatively either keeping their money in the bank or buying property. That's what's driven this property boom over the last few years. Because with 18% inflation, the money in the bank has depreciated, it does not bring any profitability. People are very inert, there are other financial instruments," emphasized the deputy chairman of the Association of Credit Intermediaries.

Asked how much of the Bulgarian's savings had already been spent, he replied: "Besides Covid and the business situation, there were deferred loan payments. We saw that the restaurants and guest houses were full for the New Year. I didn't hear that Velingrad was empty, apparently people have savings. Bulgarians' incomes are growing. Part of the interrupted production due to the war in Ukraine and Russia is also directed to us. When incomes increase, inflationary pressure also increases."

The guest was adamant that fast loans are for emergency situations.

"This is the least recommended option. How much we have spent through NG is entirely our choice, not an accident. Unfortunately, part of the population resorts to these loans and some people resort to them with unreasonable planning of personal finances The interest rates on these loans are the highest, they are not secured - you withdraw BGN 200, but you return BGN 250. We do not advise people to take out loans for current expenses," added Deyan Vasilev.

The expert advises people to reduce unnecessary expenses.

"This year, the credit market will be more suppressed. Last year there was a growth of about 30% in volumes and about 10% in the number of loans. Stopping the conflict in Ukraine, if this happens, will greatly stabilize inflation," Vassilev also said.

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deposits