The Executive Board of the Central Bank has announced a temporary interest rate cap of 5% on both existing and new loans with variable interest rates, as well as on new loans with fixed rates. This restriction is part of the Draft Law on the Protection of Financial Services Users, which is yet to be submitted to Parliament. Bojan Terzić, Director General of the NBS Financial Services User Protection Sector, explained to RTS that the purpose of this measure is not only to define a maximum rate but also to prevent sudden future increases in interest rates.
Terzić noted that the temporary measure from 2023, set to expire on December 31, limited the interest rate to 4.08%. While the current cap has slightly increased, with the new interest rate expected to rise to 5%, it remains below the anticipated market rate of 5.63%. This adjustment, he explained, allows for a gradual transition to market rates without overwhelming borrowers.
The primary focus of the rate adjustment is on housing loans, though it also applies to other types of loans, such as cash loans, consumer loans, and credit cards.
According to the Central Bank’s decision, the cap extends not only to housing loans but also to cash and consumer loans. The nominal interest rate for these loans, if denominated in dinars, cannot exceed 14.75%, while the effective rate, which includes all associated costs, is capped at 15.75%. For credit cards and overdrafts, the effective interest rate cannot exceed 17.75%, or 19.75% in the case of overdrafts, where the rate will be reduced by a third for all users of this service.
The interest rate restrictions will remain in effect until the new law is adopted, which is expected to occur in January. Terzić emphasized that the main goal of the cap is not only to define a maximum rate but also to prevent the sharp interest rate increases seen in the latter half of 2022 and 2023, as well as to encourage banks to offer more fixed-rate loans, particularly for housing.
Prior to the implementation of these temporary measures, NBS data indicated that 80% of housing loans had variable interest rates, while only 20% were fixed-rate loans.
