Small consumer loans, interest rates fell again in the second 6 months of 2023

2024-01-24 07:11:00, Ekonomi CNA

Average interest rates for consumer loans in the financial market fell further in the second half of last year.

According to data from the Bank of Albania, the average effective interest rate for loans up to 200 thousand ALL decreased to 74.78%, from 78.38% in the previous six months and 89.22% in the second half of last year. .

Whereas, for bank advances (overdrafts) up to 200 thousand ALL, the average effective rate decreased to 13.93%, from 14.21% that was in the first half of the year, but increased from the level of 13.62% that was in the second half of 2022 .

Even for credit cards with a limit of up to ALL 200,000, the average interest rate fell to 20.54%, from 21.17% in the first half of the year, but a slight increase from the level of 20.38% in the second half of of 2022.

For installment loans worth from 200,000 to 600,000 ALL, the average effective interest rate increased to 30.45%, from 24.57% in the first half of the year.

Meanwhile, for large loans from 600 thousand to 2 million ALL, the average interest rate decreased to 11.68%, from 12.95% in the first six months.

Small consumer loans, interest rates fell again in the second 6 months of 2023

The above interest rates are calculated on all consumer loans granted by banks and non-bank financial institutions, based on the actual data that are reflected in the Credit Register administered by the central bank. The calculation of the average effective interest rate serves as the basis for further calculating the maximum effective interest rate for consumer loans (maximum NEI)

The average effective interest rate does not mean only the nominal interest rate of the loan, but all costs charged to the customer for the loan, including commissions or other fees.

The decrease of the effective average interest rate despite an increasing trend of nominal rates in the last two years can be explained by an increasing competition in the consumer loan market and especially for smaller loans.

Given that here the margins are relatively high, lending institutions have had room to compete with prices, despite the fact that the cost of providing funds has started to increase after 2022.

The application of a maximum effective interest rate by the Bank of Albania seems to have served as a factor that moved the average loan interest down. Since the beginning of 2022, when the application of the ceiling interest rate began, this indicator has continuously moved downward for small loans with installments of up to 200 thousand ALL./ Monitor.al