Good news if you are planning to take out a loan or have one already.
A new drop in interest rates for loans is ahead of us. The national reference rate (NRS) has again declined, on average by 0.09 to 0.13 percentage points for the kuna loans and by 0.13 to 0.20 percentage points for euro loans, compared to the previous quarter. For creditors whose interest rate is tied with the NRS, this is certainly good news: banks will soon begin announcing lower interest rates, and they will first be applied to annuities which will be payable in August, reports Večernji List on May 25, 2017.
For example, the Croatian Postal Bank (HPB) will lower interest rate on loans with the foreign currency clause by 0.55, and on the loans in kuna by 0.25 percentage points. As announced by representatives from the Croatian Banking Association, there is room for a new interest rate cuts in the coming quarters, as the NRS is dependent on the changes in the interest rates paid by Croatian banks for deposits made by persons and businesses, which are at historically lowest levels, and does not depend directly on foreign reference rates, for example the Euribor rate, which is expected to rise shortly after the European Central Bank increases its benchmark interest rate.
So far, the 12-month NRS has declined as many as 17 times. In a certain way, the interest rate decline trend acts counter-cyclically with the announcements made by Boris Vujčić, the governor of the Croatian National Bank, who intends to recommend to the banks to fix the interest rates in their floating interest rate loans, in order to eliminate the interest rate risk due to the expected Euribor growth. But, given that interest rates are still falling, clients are not often deciding to fix their interest rates, which would make their loans more expensive.
The growth of the Euribor and the impact on debtors whose variable interest rates are tied to it is expected during 2018, but two other trends can be expected: one is the reduction in the country’s general risk and the improvement in its credit rating, and the other is further intensification of the competition for clients in the banking market.
How much such moves will succeed in cancelling the growth of the Euribor remains to be seen, but it is certain that the benefits of refinancing loans with lower interest rates can only be achieved by clients with a good credit rating.
