Turkish Banks Are Taking Losses on Mortgages After Rate Pressure

Source:Bloomberg Date:06Apr2017

We have long argued that Turkish banks are under strong pressure to lend at low margins and the current growth model based on cheap credit is unsustainable. A recent article at Bloomberg finds evidence supporting our viewpoint:
“President Recep Tayyip Erdogan, whose opposition to high interest rates is well known, began calling on commercial banks in August last year to slash their rates on mortgage loans. One after another, the banks obliged, cutting rates to below 1 percent monthly. The problem for the lenders is that since then, their borrowing costs have risen considerably, a move they’re not passing on to home buyers”.