When loans will become cheaper - the head of the National Bank stated the conditions
Tengrinews.kz — Why has the ongoing reduction of the base rate not yet impacted interest rates on loans and mortgages? National Bank Chairman Timur Suleimenov addressed this question.
According to the head of the National Bank, the effects of base rate changes do not manifest immediately.
"The base rate always operates with a lag (a delay — Ed.). That is the first point. Second: the base rate is a short-term instrument. That is why we make decisions on it eight times a year. We do not directly influence three-, five-, or seven-year loans via the base rate. This circumstance must also be taken into account," Timur Suleimenov explained.
At the same time, according to him, the process of lowering loan rates has already begun.
"Nevertheless, rates have already begun to decline gradually. We will be publishing a monetary policy report and a lending report where this will be evident," the head of the National Bank said.
Timur Suleimenov illustrated the mechanism with the following example: if a person took out a loan six months ago, today's National Bank decision will not change the terms of the previously concluded agreement.
"You took out a loan six months ago under a different base rate, different economic forecasts, and different inflation dynamics. You will have this loan for the next three years. Because we made a decision on the base rate today, your rights and obligations under that contract do not change. Until the loan is refinanced or fully repaid, today's base rate will have no effect on it," the head of the National Bank stated.
For this reason, a time lag occurs between the National Bank's decision and changes in the cost of money in the economy, he added.
During the briefing, a question was also raised regarding why loans remain expensive despite high bank profitability. Suleimenov disagreed with this assessment.
"This year, bank profitability has significantly decreased in both absolute and percentage terms. The era of ultra-high returns is over," he declared.
According to the head of the National Bank, this was influenced by tax changes, regulatory measures, as well as the regulator's own decisions.
"Bank profitability has decreased and is normalizing. We believe this is correct. It is better to speak with figures in hand. I believe that a normalization of banking profitability is currently taking place, with the impact being distributed between both the lender and the borrower," Suleimenov concluded.
Kazakhstan Lowers Base Rate
Today, September 4, the National Bank lowered the base rate from 16.75 to 16.25 percent per annum. This marks the third consecutive cut. In June, the regulator reduced the rate for the first time in two years, from 18 to 17 percent, and in July, to 16.75 percent.
Timur Suleimenov attributed the new decision to slowing inflation and a strengthening tenge. Annual inflation dropped to 9.8 percent in August. However, the head of the National Bank warned that the scope for further rate cuts remains limited due to persisting pro-inflationary risks.
Previously, Suleimenov had already warned that lowering the base rate does not mean an immediate reduction in the cost of loans and mortgages. Following the July decision, he explained that banks need time to revise their funding costs and the terms of new credit products.