Base Rate Reduction: Will Loans Become Cheaper for Kazakhstanis?
The National Bank of Kazakhstan has reduced the base rate to 14.5%, but this does not guarantee an immediate reduction in the cost of credit for the population. Experts explain what conditions must be met for a tangible reduction in interest rates on loans.
The National Bank of Kazakhstan recently reduced the base rate by 25 basis points to 14.5%. Thus, since the beginning of the year the key rate has decreased by 0.75%. Second-tier banks make decisions on interest rates on loans and deposits based on the base rate, but this does not mean that loans from financial institutions will immediately become cheaper or more expensive.
Commercial banks consider many other factors when setting rates for loan products and deposits. For example, despite the reduction of the base rate, the weighted average rate on loans to individuals and individual entrepreneurs in April was 20.8%, which is 0.8% more than in March.
Why do loans not become cheaper immediately?
Financial consultant Rasul Rysmambetov believes that at the moment banks cannot significantly reduce rates on loans for individuals, especially on consumer loans. This is due to possible changes and tightening of conditions on consumer loans at the legislative level. Banks are taking a wait-and-see attitude in order not to face the growth of defaults on loans to individuals. Consumer lending is a high-risk and high-yield direction. Analyst Arman Beisembayev notes that the demand for consumer loans remains high, and banks see no point in reducing rates, given the high level of risk.
Talgat Iglikov, an expert, believes that several conditions must be fulfilled for a tangible reduction in interest rates on loans:
Lower inflation rate. With stable and low inflation, risks for banks are reduced, creating favourable conditions for reducing loan rates.
Increased competition in the banking market. Increased competition encourages banks to lower rates to attract more customers.
Improved creditworthiness of the population. Higher incomes and better financial position of the population reduce the risk of loan defaults.
Conclusion
Thus, a reduction in the base rate alone does not guarantee a reduction in the cost of credit for Kazakhstanis. It requires a combination of several economic factors, such as lower inflation, increased competition in the banking market and improved financial position of the population. In the near future, we cannot expect a significant reduction in interest rates on consumer loans.
From information sent by an anonymous source
The editorial board is not responsible for the content and accuracy of material taken, sent or obtained from other sources. The publication of such materials is for informational purposes only and does not imply automatic endorsement or approval of their content.
