Is it time for the return of favorable loans? Analysts had predicted a decline in interest rates in 2024. However, there hasn’t been a significant drop in the cost of borrowing so far, and central banks have hesitated to lower their rates, which could indicate potential reductions in loan rates by banks.
Citizens, who often rely on loans for everyday expenses, are eagerly awaiting developments: Will interest rates decrease? Similar concerns are echoed by businesses, with comments on economic loans coming from Jorgovanka Tabaković, the governor of the National Bank of Serbia. She emphasized that it’s time to acknowledge that the era of cheap loans for businesses, stemming from a period when European interest rates were zero or even negative, won’t return.
“It’s time to be clear and vocal about it. In the past, funds flowing from the European market, where interest rates were zero or negative, led to business loans at around 2.9 percent. But that era won’t return. We need to adjust to a new cost of borrowing,” she emphasized.
This shift implies more expensive loans, impacting the general populace.
Currently, citizens predominantly seek cash loans and refinancing options. This trend still surpasses the demand for housing loans.
Despite a gradual increase in housing loan applications, a peculiar contradiction remains: citizens frequently purchase everyday necessities on credit, while property transactions are predominantly cash-based. Expectations for a significant drop in interest rates are muted.
Interest rates persist at relatively high levels. On average, cash loans come with interest rates exceeding 12 percent. Rates around nine or ten percent are a rare find in the lending market.
“We’d all welcome lower rates. Affordable credit boosts purchasing power… Unfortunately, we’re not there yet. Serbia’s projections suggest that the National Bank might track inflation for another couple of months to ensure stability before considering gradual adjustments,” noted financial advisor Vladimir Vasić.
However, the anticipated adjustments won’t likely return rates to pre-inflation crisis levels.
“The cost of borrowing must align with reality. Unrealistic rates shape consumer behavior differently,” Vasić emphasized.
Regarding loans tied to the euro, particularly housing loans, there’s speculation that the European Central Bank could soon lower interest rates. Such a move could potentially reduce the Euribor and subsequently ease monthly loan installments for borrowers in Serbia.
