Interest rates fell by 8 percent, the continuation depends on the ECB

Banks in Montenegro reduced interest rates on loans by an average of eight percent in the last three months, according to data from the Central Bank.

The average effective interest rate on loans approved in April was 6,89 percent, while in February it was 7,50 percent. The average interest for citizens was reduced from 8,71 in February to 8,39 percent in April, and in the same period the average interest for the economy was reduced from 5,86 to 5,68 percent.

An additional reduction in interest rates is possible in the coming months as the European Central Bank lowered the reference interest rate (EURIBOR) by 0,25 percentage points last week, announcing a further reduction in September. The six-month EURIBOR, which banks most often use when calculating their interest rates, was 3,73 percent at the end of last week, and it is expected to drop to 3,5 percent during the week due to the ECB's decision. EURIBOR was at its peak in October last year when it was 4,14 percent. For the past two years, the ECB has raised the value of the reference interest rate in order to fight inflation.

Representatives of Montenegrin banks made the announcement at a meeting with the Governor of the Central Bank Irene Radović mid-March lowering of interest rates. Statistics now show that banks actually did some in March and others in April.

For most credit products, interest rates are usually reduced by 0,5 to one percentage point.

Thus, the effective interest rate on housing loans (which includes all related costs) in February of this year was 6,47 percent, and at the end of April it was 5,85 percent, that is, it was reduced by almost ten percent or 0,62 percent. points. Montenegrin banks approved 14,6 million euros for housing loans in April, while the amount in February was 9,4 million.

The most money for cash loans

The average effective interest on non-purpose cash loans was 9,83 in February, and 9,22 percent in April, which is a decrease of 6,3 percent or 0,61 percentage points.

In April, banks approved a total of 48,6 million euros for cash loans, which is almost 30 percent of the total loans approved in that month. In February, that sum was worth 47,6 million euros, which was about a third of the then total amount of approved loans. Since the January minimum pension increase from 296 to 450 euros, which is now received by almost two-thirds of pensioners, the approval of cash loans has increased significantly for this population group, which became creditworthy with this increase.

Approved cash loans for individuals in January this year were worth 22,3 million euros, in February 41,6 million, in March 47,6 million, and in April 48,5 million, which is a new historical record for this type of loan.

The average effective interest rate on car loans in February was 8,91 percent, and in April it was reduced to 7,94 percent, which is a drop of 11 percent or 0,97 percentage points. Loans for the purchase of cars in April were approved in the amount of 764 thousand euros, while in February they were worth 538 thousand.

Slight drop in loans for liquidity

The average effective interest rate on loans for working capital and liquidity in February was six percent, and in April it was 5,94 percent. Of all the interest rates, there was the smallest drop here by only one percent or 0,06 percentage points. These loans, which are mostly taken by the economy, were approved in April in the amount of 44,7 million euros, which is a slightly smaller amount than in February, when it was 46,6 million euros.

The average effective interest rate on refinancing loans decreased from 8,64 percent in February to 7,96 percent in April. This is a drop of eight percent or 0,68 percentage points.

Loans for the refinancing of obligations were approved in April in the total amount of 7,3 million euros, of which 4,6 million relate to citizens and 2,6 million to legal entities. These loans were approved in February in the amount of six million euros, of which 5,1 million were for citizens and about 900 thousand for legal entities.

Interest rates only increased for the Government

Interest rates were not reduced only for the "general government" sector, which consists of government institutions and for which the effective interest rate was 5,11 percent in February and 6,35 percent in April. These loans were approved in the amount of 700 in February and 286 in April. The government took loans of 109 million euros from banks in December last year, when the average effective interest rate for this sector was 6,71 percent.

On savings from 0,01 to 2 percent

The average interest on deposits and savings at the end of April amounted to 0,26 percent, and had a slight increase compared to February's 0,25 percent.

The interest rate on demand deposits, which clients can withdraw whenever they want, was 0,01 percent. The interest rate on time deposits from one to three years is 1,64 percent, and on time deposits for five years or more it is two percent.

Credit growth continued

With the drop in interest rates, lending continued to grow.

Banks approved 88 million loans in January, 125 million in February, 153 million in March and 170 million in April. In total, 538 million euros in loans were approved for these four months, that is, 136 million or 34 percent more than in the same period last year.

The total amount of approved loans, which banks claim, at the end of April amounted to 4,36 billion and was 460 million more than in the same month last year. This is the highest amount of total approved loans so far.

Citizens keep almost two billion in banks

Total deposits in banks at the end of April amounted to 5,33 billion euros and are 120 million more than in the same month last year.

Domestic citizens kept 1,91 billion euros in banks, which is 215 million more than in April last year.

The domestic economy in banks has 1,54 billion, which is 204 million less than last year in the same month.

Foreign citizens and their companies have 1,33 billion euros in domestic banks, which is a slight decrease of 15 million for the year.

Government institutions and local governments have 410 million euros in banks, which is an increase of 116 million compared to April last year.