Mortgage loans in Bulgaria grew by a record 207 million euros in one month

Against the backdrop of increasing warnings from the Bulgarian National Bank (BNB) about the state of the housing loan market in the country, lending in this credit segment continues to boom. Not only are there no signs of cooling, but BNB statistics show that for June the annual growth is almost 25% - something not seen since 2009.

The first summer month of the year was extremely strong for mortgage lending in Bulgaria. The total volume of home loans swelled with a record 207 million euros lent out within one month, to reach an unprecedented total of 11.1 billion euros in size. In percentage terms, the monthly growth reaches 2.36%, which is above the traditional 2% for the last few years.

Statistics show that since the beginning of the year, the total volume of home loans has grown by an average of 203 million euros per month. For comparison, last year this amount was only 141 million euros, and 104 million euros in 2022.

During the first half of the year, the volume of mortgage lending grew by about 1 billion euros in Bulgaria.

The accelerated mortgage lending is a result of the ever-higher property prices in Bulgaria, and according to data from the country’s central bank, the average amount of a mortgage loan now reaches about 100,000 euros.

An essential factor for lending is the record low interest rates, which according to the latest forecast of the central bank will not change much. At the same time, the tightening of the European Central Bank’s monetary policy and the raising of the mandatory minimum reserves for banks in Bulgaria has had only a "limited effect".

According to the forecast, the interest rates on new home loans will follow a weak upward trend during the forecast period (2024 - 2026)", states the BNB.

Despite accelerated lending, BNB data show that the quality of loans is improving with each passing month, including in June, when problem mortgage loans fell to below 121 million euros.

There is also a small acceleration in consumer lending, whose annual growth in June reached 14% and exceeded 9 billion euros. In nominal terms, the monthly growth was about 165 million euros or about 1%.

Corporate lending

Corporate lending continues to follow its trend of weaker growth in terms of volumes compared to that of mortgages. For a year, it grew by 8.5%, and on a monthly basis – by 1.3% or 295 million euros. Still, this is the strongest growth rate of corporate lending since February.

It is actually the business loans in Bulgaria that have felt the change in the interest rate policy in recent years, and they have become significantly more expensive. With the first lowering of the main interest rate by the ECB, the BNB expects corporate lending to accelerate and its cost to decrease at the end of 2024.

Savings

For the month of June, Bulgarian households and businesses accumulated savings to the tune of 750 million eruos. This is the largest monthly growth in deposits since the beginning of the year and the strongest since December 2023. This means that households have increased their savings by around 500 million euros to reach 41.9 billion euros, and businesses - by about 250 million euros for a total of 22.1 billion euros in deposits.

Total deposits in the banking system have grown to 65.6 billion euros, a record in the economic history of Bulgaria. This further increases the country’s banks' liquidity and makes it easier for them to maintain their low interest rates on housing loans.

Translated by Tzvetozar Vincent Iolov