After leveling off and even edging lower for two months, interest rates on consumer and housing loans in Bulgaria turned around in May to top 13.96% and 10.39%, respectively. The increase was triggered by higher rates on term deposits, which hit 8.23% for levs and 6.73% for euro, showed figures of the Bulgarian National Bank (BNB).

The effective interest rate on euro-denominated home loans defied the uptrend, slipping to 8.16% from 8.21% in April, close to the 8% level recorded for last September.

Climbing interest rates pushed up the annual percentage rate (APR) to 15.01% for local-currency consumer loans, up almost 3 percentage points on the year. Euro-denominated consumer loans came with a rate of 12.73%, and the housing loans in the respective currencies bore 11.01% and 8.95%. Another driver behind the APR was the lenders’ base interest rates, which replaced market indexes such as Euribor, Sofibor and the central bank rate.

Bulgarian banks are increasingly turning into the domestic deposit market for fresh resources as the credit crunch clogged up international markets. Some signed credit lines with institutions such as the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB). Pressed by the global crisis, parent banks cut back or stopped cash flows to their divisions in the region, tying up new loans with attracted deposits. Amid waning confidence, mounting risk and limited funding, loan borrowers started to dig deeper to cover their monthly installments.