05 August 2019 Monday
Will “Inflation Indexed Housing Loan” be successful?
Three public banks have launched the “Inflation-Indexed Housing Loan” product for those who want to own housing. Istanbul Gelisim University, Prof Dr Lokman Kantar from Department of Banking and Insurance Assist. said: “Of course, the assumption is that inflation is expected to fall gradually, evaluating the campaign. Otherwise, it will not be possible to get the expected benefits from this product, he explained.
Public banks began to offer inflation-indexed housing loans after inflation-protected deposit account. At this point, Ziraat Bank, Vakif Bank and Halkbank announced that they have launched the implementation of inflation indexed housing loan application. Enflation-indexed housing loans with maturity options up to 120 months are offered, interest rates will change depending on the Consumer Price Index (CPI). Thus, the installment amounts will decrease with the inflation rate.
Chairman of the Banks Association of Turkey Board of Directors and Ziraat Bank General Manager Huseyin Aydin explained that the main purpose of the campaign is to take forward the demands of the loanee who expect the mortgage loan interest rates to fall due to the high ratio. On the other hand, Mr Aydin stated that a loanee who will benefit from this product can transfer another fixed interest housing loan any time without expense. Evaluating the campaign conducted by the 3 public bank, Istanbul Gelisim University (IGU) Banking and Insurance Department Assist. Prof Dr Lokman Kantar suggested to determine the advantages and disadvantages of this product correctly at this point because the expectation that inflation will fall in the future lies behind the emergence of this product and there is a desire to prevent the consumers from delaying the need to buy a house.
Mr Kantar added that because the average credit cost of existing products is 1.75 percent per month, according to the recently announced May inflation rate of 18.71 percent in the new product, this rate is 1.56 percent monthly adding the 0.19 monthly margin, the cost of the loan will be 1.75 percent once a month. However, like in previous years, if this rate gradually drops to 12.15 percent year-on-year, 1.20 percent, 11.72 percent, 1.17 percent, and 4. 4-year inflation drops to 6.58 percent, the monthly loan cost of the loanee will be 0.74 percent.
Lokman Kantar, who made an example for a better understanding of the new campaign, said that of course, in order to understand the product better here in terms of money to express today's 120-month term, 200 thousand Turkish liras inflation indexed housing loan attracts monthly instalments (1.75 percent) will be approximately 3 thousand 998 liras. If the inflation rate for the same amount (in the end of the following year) drops to 12.15 percent, monthly instalments of approximately 3 thousand 153 liras, inflation rate drops to 11.72 percent of 3 thousand 110 liras, 6.68 percent of the monthly instalment amount of inflation falls to 2 thousand 520 liras. Mr Kantar said that inflation-indexed housing loan is expected to pay a total of 334 thousand 812 liras for a loan of 200 thousand liras, 200 thousand liras consistent, fixed 1.69 percent interest on a 120-month housing loan 3 thousand 902 liras and a total of 468 thousand 240 liras will be paid.
THE EXPECTATION FROM THE INFLATION TO FALL
Stating that the assumption is that inflation is expected to fall gradually, Lokman Kantar. said: "In order for this to happen under the current conditions, the tight monetary policy to be implemented by the Central Bank, the Treasury and the Ministry of Finance should support the Central Bank with this inflation targeting policy, end the uncertainties in the country and the exchange rate volatility should be controlled. Otherwise, it is not possible to obtain the expected benefit from this product."
86 PERCENT REDUCTION IN MORTGAGE SALES
Housing sales became 82 thousand 252, decreasing by 31.3 percent in May compared to the same month of the previous year. Mortgage sales fell 86 percent.
