site.btaExperts: Bank Interest Rates on Consumer Loans Have Fallen to Pre-Crisis Levels

Experts: Bank Interest Rates on Consumer Loans Have Fallen to Pre-Crisis Levels

Sofia, June 30 (BTA) - Bank interest rates on consumer loans in Bulgaria have fallen back to the levels before the 2008 financial crisis - to an average of 10.13 per cent in early 2016, compared with 13.48 per cent in 2009 and 9.76 per cent in 2007, Borislav Genov, Chief Commercial Officer for UniCredit Consumer Financing (UCCF) in Bulgaria, said earlier this week.

Genov said that the stabilization of the economic environment has encouraged banks in Bulgaria to offer better conditions to their clients and has boosted demand for loans. After bank lending peaked between 2007 and 2008, with consumer loans exceeding 5 billion leva in 2008, the annual amount plummeted to 1.7 billion leva in 2009. The market has been recovering slowly ever since; in 2015, consumer loans already amounted to 3.447 billion leva, and in 2016 they are expected to reach 3.736 billion leva, according to data of UniCredit Bulbank and the Bulgarian National Bank.

Consumer loans have served basically the same purposes ever since 2006, Genov went on to say. They are most often used to finance housing repairs and furnishing, or to buy a used car. But new trends are discernible as well. Consumer loans now also go towards refinancing current liabilities, supplementing payments on property, or using online or mobile banking services to obtain money.

Bulgarians often take out consumer loans to clear their mortgage liabilities, because they do not usually want to bear home-related encumbrances, UniCredit Bulbank CEO Levon Hampartzoumian explained.

While in 2006 the financial products offered to clients were rarely coupled with insurance, nowadays clients seek insurance against possible disability, unemployment, theft or damage to goods purchased by them. Buying goods on credit is becoming increasingly popular in Bulgaria, and now many products are offered on credit at zero interest.

Credits on goods are granted for about the same periods now as they were granted years ago. The average period decreased to 13 months in 2015 from 15 months in 2011. The average size of such credits grew from 682 leva in 2006 to 822 leva in 2009 to more than 710 leva over the last four years.

Smartphones are the most popular type of product purchased on credit in 2015 and 2016. Due to their relatively high price, averaging 600 leva, many clients prefer to use credit schemes in order to acquire them. Unlike smartphones, tablet computers were only relatively high on the list in 2013 and 2014, when they were the sixth most preferred product among on-credit buyers, and in 2016 they may even drop out of the top 10, according to UniCredit Bulbank.

Consumer lending in Bulgaria is expanding at a steady rate and is well-developed compared with the other countries of Central and Eastern Europe. This is due to three main reasons: first, although incomes in Bulgaria are lower than the average European level, they have increased slowly yet steadily over the years; second, Bulgaria offers a well-developed competitive environment; and third, there is more reliable information about the creditworthiness of Bulgarian clients than those in the rest of Europe, including Western Europe, UCCF Chief Executive Giacomo Volpi said. He noted that, at present, consumer loans in Bulgaria account for 12.7 per cent of GDP, while in most other Eastern European countries the ratio is between 7 and 10 per cent, which shows that the Bulgarian consumer lending market is well-developed.