Rise of Euribor and its consequences – What awaits those paying out variable-rate loans

The six-month Euribor, the benchmark cost of money most commonly used to calculate euro-indexed loans, is rising again after two years of stability, having reached 3%. These rates are significantly increasing installments for variable-rate housing loans. The National Bank of Serbia does not anticipate dramatic changes.

Borrowers with housing loans had just recovered from the shock of a sudden interest rate hike, as rates had doubled four years before, when the European Central Bank began raising its key interest rate again due to the oil price shock. This increase is passed on to borrowers with variable-rate contracts.

Three years ago, the National Bank of Serbia implemented a repayment moratorium and halted a potential rise in non-performing loans - primarily through the enactment of the Law on the Protection of Users of Financial Services.

At that time, overarching mechanisms were established to ensure that such a sudden, rapid rise would not permanently render clients unable to repay their loans.

– Limits were introduced. The National Bank of Serbia adjusts these limits every six months based on the weighted average interest rate; specifically, the interest rate increase over the next six months is not permitted to exceed twenty percent of the weighted average interest rate, which is determined twice a year – explains Darko Stamenkovic, Director of the Banking Supervision Department at the NBS.

While awaiting the next interest rate adjustment in December, experts believe that the total housing loan debt should not increase by more than 6%, and the monthly installment by one-fifth.

Narodna banka Srbije Beograd

BBA-Beogradska Bankarska Akademija

National Bank of Serbia

NBS

Darko Stamenković

six month Euribor

cost of money