The average effective interest rate on loans approved in April was 6.89%, down from 7.50% in February. For individuals, the average interest rate decreased from 8.71% in February to 8.39% in April, while for businesses, it dropped from 5.86% to 5.68% over the same period.
Further reductions in interest rates are likely in the coming months, following the European Central Bank’s (ECB) recent decision to cut the reference interest rate (EURIBOR) by 0.25 percentage points. The ECB has also hinted at another rate cut in September. The six-month EURIBOR, commonly used by banks to set their interest rates, was 3.73% at the end of last week and is expected to fall to 3.5% as a result of the ECB’s decision. EURIBOR reached a peak of 4.14% last October. The ECB has been raising the reference rate over the past two years to combat inflation.
Montenegrin bank representatives announced a reduction in interest rates during a meeting with Central Bank Governor Irena Radović in mid-March. Statistical data now show that some banks reduced rates in March and others in April.
Most loan products saw interest rate reductions of between 0.5 and one percentage point.
For example, the effective interest rate on housing loans (which includes all associated costs) fell from 6.47% in February to 5.85% at the end of April, a reduction of nearly ten percent or 0.62 percentage points. Montenegrin banks approved €14.6 million in housing loans in April, up from €9.4 million in February.
Most funds allocated for cash loans
The average effective interest rate on unsecured cash loans decreased from 9.83% in February to 9.22% in April, a drop of 6.3% or 0.61 percentage points.
In April, banks approved a total of €48.6 million in cash loans, nearly 30% of the total loans approved that month. This is an increase from €47.6 million in February, which was about a third of the total loans approved then. Since the January increase in the minimum pension from €296 to €450, which now covers nearly two-thirds of pensioners, the approval of cash loans to this group has significantly increased, as they have become more creditworthy with this increase.
Cash loans approved for individuals in January this year amounted to €22.3 million, increasing to €41.6 million in February, €47.6 million in March, and €48.5 million in April, setting a new historical record for this type of loan.
The average effective interest rate on car loans dropped from 8.91% in February to 7.94% in April, a reduction of 11% or 0.97 percentage points. Car loans approved in April amounted to €764,000, up from €538,000 in February.
Slight decline in liquidity loans
The average effective interest rate on loans for working capital and liquidity decreased from 6.0% in February to 5.94% in April. This represents the smallest decrease among all loans, only one percent or 0.06 percentage points. These loans, mostly taken by businesses, were approved for €44.7 million in April, slightly down from €46.6 million in February.
The average effective interest rate on refinancing loans fell from 8.64% in February to 7.96% in April, a decrease of eight percent or 0.68 percentage points.
Refinancing loans approved in April totaled €7.3 million, with €4.6 million going to individuals and €2.6 million to legal entities. In February, €6 million was approved for refinancing, with €5.1 million for individuals and around €900,000 for legal entities.
Interest rates only increased for government loans
Interest rates did not decrease for the “general government” sector, which includes government institutions. The effective interest rate for this sector increased from 5.11% in February to 6.35% in April. In February, €700,000 in loans were approved for the government, compared to €286,000 in April. In December last year, the government took out loans totaling €109 million, with an average effective interest rate of 6.71%.
Savings interest rates from 0.01 to 2%
The average interest rate on deposits and savings at the end of April was 0.26%, a slight increase from 0.25% in February.
The interest rate on demand deposits, which clients can withdraw at any time, was 0.01%. For term deposits of one to three years, the interest rate was 1.64%, and for terms of five years or more, it was two percent.
Continued growth in lending
With the decrease in interest rates, lending has continued to grow.
Banks approved €88 million in loans in January, €125 million in February, €153 million in March, and €170 million in April. A total of €538 million in loans was approved over these four months, €136 million or 34% more than in the same period last year.
The total amount of loans approved, which banks are owed, was €4.36 billion at the end of April, €460 million more than in the same month last year. This is the highest amount of total approved loans to date.
Citizens hold nearly two billion in banks
Total deposits in banks at the end of April amounted to €5.33 billion, €120 million more than in the same month last year.
Domestic citizens hold €1.91 billion in banks, €215 million more than in April last year.
Domestic businesses have €1.54 billion in banks, €204 million less than in the same month last year.
Foreign citizens and their companies have €1.33 billion in domestic banks, a slight decrease of €15 million over the year.
Government institutions and local governments hold €410 million in banks, an increase of €116 million compared to April last year.
