In March, the population borrowed only by 0.2 percent more compared to February, while the annual growth was 6.3 percent.
Our reader Ivana M. was called by “her” bank a few days ago offering to refinance a cash loan that she is already repaying. “Come to the nearest branch, we have a special, personalized offer for you,” kindly offered the bank employee. Our reader paid off half of the cash loan approved for six years, and the new additional borrowing intrigued her.
“Is it worth it,” she asked. It is true that she needs money for many things, but from what she hears, the interest rates are higher now than when she took the loan. To tell the truth, when she took out the loan, the interest rates were below ten percent, and now they are about five percent higher – about 14 percent.
Experts in this matter say that the answer to the question about the profitability of new borrowing is a matter of “mathematics” and its needs, that is, the ability to repay the loan. Whether the needs are urgent or not and whether the new debt fits, according to the amount of the salary, in the possibility of repayment.
Inflation, which devalues the value of money, reached 16.2 percent, so loan interest rates are now practically equal to it. Last year, when the growth of interest rates lagged behind the growth of retail prices, it was said that borrowing was profitable because of this.
Banks live by giving loans, with fees and commissions, it is the dominant source of their earnings. Since the interest rates are rising, the indebtedness of both the population and the economy is falling, so banks will only be calling clients on the phone and convincing them to take out a loan. According to data from the Association of Banks for March of this year, the monthly growth of household loans compared to February was only 0.2 percent. Annual growth was 6.3 percent.
The decline In lending can also be seen by loan groups. In one month, cash loans increased by only 0.3 percent, housing loans by 0.2 percent, and consumer loans were unchanged from a month earlier, which means that there was no growth at all. On an annual basis, measured from March 2023 to March 2022, the growth of cash loans was 3.3 percent, and consumer loans 0.8 percent.
In one year, 11 percent more housing was approved, which is good data that indicates that this type of loan is still profitable for borrowers compared to renting real estate whose prices have gone “sky high”.
How cheap money affects lending can best be seen from a comparison with 2021, when the reference interest rate of the National Bank was only one percent for the entire year and when the base interest rate of the European Central Bank was negative. In that period, the growth of household loans was 10.6 percent per year. Cash grew by 10.1 percent, consumer by as much as 26.2 percent, and housing by as much as 16.8 percent.
The population owed banks a little more than 12.2 billion euros at the end of March, and 11.3 billion euros at the end of 2021. Zoran Grubišić, a professor at the Belgrade Banking Academy, says that our reader should go for an interview and look at the offer.
“I don’t advise people to take loans with fixed interest rates, because they are too high.” I hear that some banks offer their clients a fixed interest rate on the grounds that they are protected from interest rate jumps and monthly installment changes. Now is not the right moment for protection when interest rates are at their peak. Fixed interest is always higher than variable interest. The moment to take loans with fixed interest was a year ago, not now. Of course, after the battle, all generals are smart”, says Grubišić.
He adds that everyone should evaluate the offer and their own situation. He reminds that refinancing is most advantageous with his bank, less costs are paid. When, for example, a home loan is refinanced, the mortgage with the first bank must be removed in order to place the mortgage with the second bank.
