The latest reduction in the reference interest rate by the National Bank of Serbia by 25 basis points is expected to result in more favorable loan conditions, according to Dušan Uzelac, editor of the Kamatica portal.
Uzelac explained that a decrease in the interest rate, as a parameter of the banking system, should lead to cheaper money in circulation. While this reduction should eventually benefit consumers, Uzelac highlighted a significant issue within the industry: poor pricing flexibility.
He noted that even when the cost of a resource decreases and conditions are met for a lower final product price, this often does not translate to reduced consumer costs due to inadequate consumer response, allowing banks to maintain higher prices.
This issue has prompted the National Bank of Serbia to propose a draft law aimed at protecting financial service users. Uzelac emphasized that this legislation is intended to limit sudden increases in loan costs.
Last year, the rise in the Euribor rate caused a drastic increase in loan installments for many people in a short period. The proposed law seeks to regulate how much loans can increase in cost, ensuring that, for example, if the average weighted interest rate on housing loans is 4%, it can only increase by 20% to 4.8%, rather than experiencing more significant jumps.
Uzelac acknowledged that although these changes did not disrupt regular loan payments, they did lead to higher costs for consumers. He praised the responsible approach of borrowers who made sacrifices to meet their obligations.
When advising on loans, Uzelac stressed that no loan is inherently cheap. He recommended taking out loans only when one is confident in their ability to repay and advised that loans should be used for long-term needs rather than short-term expenses.
