Lending, loan for consumption increases, loan for housing purchase slows down

The growth of consumer credit has accelerated in the third quarter of the year, while credit for the purchase of housing has not had the same pace.

According to the Bank of Albania, consumer credit for individuals increased by 10% in the third quarter of the year, an increase of two percentage points higher than the average of the previous quarters.

Meanwhile, mortgage loans increased by 13.5% in the third quarter, about 3 percentage points less than in the first half of the year. Despite the high competition between banks and the continuous easing of conditions in this segment, the demand of individuals has slowed down reflecting the increase in the cost of housing loans and the tightening of the family budget by high living prices.

The Bank of Albania notes that during the summer months, a factor influencing the progress of the mortgage loan was the temporary deadlock in the generation of the necessary documentation from the online mortgage service.

As a whole, loans to individuals continued to grow at a double-digit rate during the third quarter, although the 12.5% ??growth in this quarter was 1.4 percentage points lower than in the first six months. This has come mainly as a result of the slowdown in foreign currency credit.

Interest rates for personal loans in Lek in the third quarter have continued to decrease. This reduction has mainly reflected the downward progress of the yield of 12-month bonds, which is used in indexing the majority of loans of this category.

The average loan interest in lek for individuals was 6.7% in the third quarter from 7% and 7.6% in the previous two quarters.

Individuals have benefited from the drop in interest rates for mortgage loans, while the decrease in consumer loans was minimal at 9.3%, from 9.4% in the first half of the year. Loan interest for housing purchase was 4% from 4.3% which was the average in the first six months of the year.

Meanwhile, the interest rate on the mortgage loan in euros has increased, bringing the interest differential with the loan in lek to negative ground.

The average interest of the new loan in euro for individuals marked a slight increase, reaching 5.5% in the third quarter, from 5.3% and 4.1%, which were the values ??of the two previous quarters. Loan interest in this category is dominated by the upward trend of the mortgage loan interest rate (5.3% from 4.3%), reflecting the increase in reference rates.

Based on the survey of lending activity, lending policies for individuals throughout 2023, unlike businesses, have been more lenient. In the third quarter of the year, banks further eased the conditions and terms of lending to individuals, driven by a competitive environment in which banks operate. In the new loans granted to individuals in the third quarter, banks continued to reduce the margins above the reference rates, as in the first half of the year.

The easing lending policies towards individuals, in addition to the price element, were also expressed in other more favorable non-price conditions, such as: lower requirements for collateral in mortgage loans, as well as in the approval of higher sizes of loans for individuals.