EKIP– Expert Club for Economics and Politics A Different Opinion
A new study of the credit market shows the main trends in loans and their interest rates. The study provides another insight into the unusual for Europe interest rate dynamics in the Bulgarian household lending sector.
On the eve of a possible reversal of monetary policy in Europe, the credit market in Bulgaria remains highly dynamic, in contrast to declining credit activity in the eurozone. There is almost no change in interest rates on housing loans, although the ECB begins raising interest rates in July 2022.
Lending in the consumer segment by non-banking companies has been growing at an outpacing pace over the past two years – 18.4% compared to 13.1% growth in consumer lending overall.
A possible explanation for this is that due to high inflation and rising interest rates (on consumer loans), consumers have turned to non-bank lending as a more flexible and faster alternative for financing their purchases, especially larger ones.
Some of the main conclusions of the analysis are as follows:
- There has been almost no change in interest rates on home loans since the European Central Bank began raising interest rates in July 2022.
- Lending to businesses, which forms 50% of the credit market, slowed in the first three quarters of 2023 compared to the same period in 2022, but lending to households, which forms 42% of the credit market, accelerated.
- The average growth in lending to non-financial corporations in the first three quarters of 2023 was 7.9% compared to 9.9% in the same period of 2022.
- For households, the average lending growth in the first three quarters of 2023 was 24.0%, compared to 22.7% in the same period of 2022.
- Non-bank companies specializing in lending are playing an increasingly important role; according to the latest data, their share in the credit market reaches 6%.
- Lending in the consumer segment by non-banking companies has been growing at an outpacing pace over the past two years – 18.4% compared to 13.1% growth in consumer lending overall.
- Credit market data shows no signs of slowing growth, especially given the strong growth in deposits and record profits accumulating in the banking system.
- However, the macroeconomic environment shows some signs of potential deterioration, with signs of weakening in the labor market, which could lead to a cooling of income growth.
- The high growth in lending shows no signs of having led to the accumulation of significant economic imbalances, except for the impact of housing lending on the property market in Sofia.
