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Consumer credit interest rates fell again in the first half of the year

2024-07-18 11:03:00, Ekonomi CNA

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

According to the data of the Bank of Albania, based on the information of the Credit Registry, the average effective interest rate for loans up to 200 thousand ALL decreased to 71.39%, from 74.78% that had been in the previous six months and 78.38% that had been for the first half of last year.

Even for credit cards with a limit of up to ALL 200,000, the average interest rate fell to 19.7%, from 20.54% in the second half of 2023 and 21.17% in the first half of last year.

Meanwhile, for bank advances (overdrafts) up to 200 thousand ALL, the average effective rate increased slightly to 14.04%, from 13.93% that was in the second half of 2023, but it is however at lower levels compared to the first half of the year last year, when it was reported at 14.21%.

Even for installment loans worth from 200,000 to 600,000 ALL, the average effective interest rate fell to 28.07%, from 30.45% in the second half of last year.

For loans from 600,000 to 2 million ALL, the average interest rate increased to 12.15%, from 11.68% in the previous six months.

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 average effective interest rate includes the nominal interest rate of the loan, but also all other costs charged to the customer, including commissions or other fees.

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 decrease in the effective average interest rate can be explained by a downward trend of lek interest rates in the financial market, but also by an increasing competition in the consumer credit market, especially for smaller loans.

Given that here the margins are relatively high, lending institutions have had room to compete with prices.

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.

Bank of Albania statistics show that consumer credit continues to grow at a double-digit rate in the first half of this year as well.

For the five-month period January-May 2024, the banking sector granted about 18.9 billion new consumer loans, including overdrafts. Compared to the same period last year, new consumer loans have increased by 33%. /Monitor