Turkey's interest rates continue to climb, expert warns of difficult path to lower rates

Interest rates on deposits and loans in Turkey are continuing their upward trend, with data from the Central Bank of the Republic of Turkey (TCMB) indicating a persistent rise.

Between May 29 and June 5, the annual compound interest rate for three-month TL deposits increased by 0.81 percentage points to 49.3%. Concurrently, the average interest rate for need-based loans saw a rise of 0.77 percentage points, reaching 64.13%. The average interest rate for need, housing, and vehicle loans was calculated at 65.25%.

Former banker and economy writer Şenol Babuşcu commented on the rising credit rates, pointing to the Central Bank's policy rate. He explained that banks add their operational costs and profit margins to this base rate. "The annual compound rate is 49%. Banks add other costs to this rate. Bank costs are 7 points. Profit margin is 5 points. Therefore, interest rates go up to a few points above 60%," Babuşcu stated.

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The annual compound rate is 49%. Banks add other costs to this rate. Bank costs are 7 points. Profit margin is 5 points. Therefore, interest rates go up to a few points above 60%.

Babuşcu expressed skepticism about significant interest rate reductions in the near future, given the current economic climate. He emphasized that a sustainable decline in inflation is necessary for citizens to access credit under more favorable terms. "For citizens to use credit at more favorable conditions and interest rates, inflation needs to drop below 15%, and interest rates below 20%. Achieving these rates is truly very difficult," he assessed.

Experts attribute the high credit interest rates to the tight monetary policy implemented to combat inflation. Elevated deposit rates increase banks' funding costs, which are then reflected in loan rates. The latest data confirms the ongoing impact of this high-interest environment for both savers and borrowers.

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For citizens to use credit at more favorable conditions and interest rates, inflation needs to drop below 15%, and interest rates below 20%. Achieving these rates is truly very difficult.