Will bank loans and mortgages become cheaper in 2027? - STATEMENT

"In Azerbaijan, there is a likelihood of a decrease in bank lending interest rates starting from 2027. However, one should not expect this process to happen quickly and sharply. The reduction in rates will depend on a number of economic factors and ongoing reforms in the banking sector."

According to BAKU.WS, this was stated by the chairman of the Society of Appraisers of Azerbaijan (SOA) Vugar Oruj.

According to him, the current average interest rate on loans is about 18 percent, and the average rate on manat deposits is around 8.3 percent:

"The Central Bank's discount rate is 6.5 percent. There is a noticeable difference in interest rates on mortgage loans as well. Thus, through the Mortgage and Credit Guarantee Fund, standard mortgages are offered at 8 percent per annum, and preferential ones at 4 percent. The average interest rate on mortgage loans issued by banks from their own funds is at the level of 11-12 percent.

There are several factors that could contribute to a reduction in lending rates starting next year. One of them is expectations related to the stabilization of inflation and steps being taken toward lowering the discount rate.

Another important factor is the intensification of competition among banks and the cheapening of financial resources. A reduction in deposit rates could also affect the cost of funds attracted by banks and create conditions for cheaper loans in the future.

The work being carried out toward reducing the volume of non-performing loans is also capable of strengthening the financial stability of the banking sector and allowing for the easing of lending conditions," the expert noted.

V. Oruj believes that all these factors could lay the groundwork for a reduction in lending rates in 2027:

"At the same time, a sharp change in interest rate policy in the banking sector is inadvisable. Since such a step could negatively affect the financial stability of banks and create additional risks.

For this reason, the process of rate reduction should be carried out gradually. In other words, cheaper loans in 2027 is a realistic prospect, but it is premature to say that this will immediately and significantly ease credit payments for citizens," he concluded.

Orkhan Huseyn