In 2016 interest rates in Bulgaria will continue to fall. The interests on bank deposits have almost reached their bottom. These interest rates will see an insignificant decrease and will remain between 0.5% and 1% by end 2016, credit expert Tihomir Toshev told Radio Bulgaria. The interest rates on bank deposits in the European Union fluctuate between 0% and 1%, and the lowest ones are offered in Lithuania, Slovakia, The Czech Republic and Estonia -between 0% and 0.1%. In Tihomir Toshev’s view, the decrease of the interest rates on credits will slow down this year, because in 2015 these rates dwindled significantly between 1% and 1.25%:

“I expect that the interest on mortgage loans, which at the end of 2015 fluctuated between 4.8% and 5.75%, will vary from 4.25% and 5.25% by year end. The interest on consumer loans also fell to 6%-10.5%. According to my estimates, at the end of 2016 these rates will range between 6%-9.5%. With regard to the company credits, the banks will offer new and more-attractive financial products to the local business. The interests for corporate clients will fluctuate between 3.5% and 5.5% at the end of 2016.”

Tihomir Toshev contends that the gap between interests on credits and deposits in Bulgaria will close slightly in the next few years and rates will slowly reach the average levels in the EU. Currently, interests on mortgage loans are considerably higher, as compared to the average in the union (2.2%). However, interest rates on consumer loans in Bulgaria are among the lowest in the EU, where these rates fluctuate between 6.5% and 15%, the expert further said. In 2015 the bank deposit continued to be the most preferred financial instrument in that country. In Mr. Toshev’s words, this was due to the fact that Bulgarians are used to keeping their money in banks and believe that it is safe to invest there. Even if interests on bank deposits fall at a negative territory, some of the money kept in bank accounts will remain there, because Bulgarians like to save up for a rainy day.

The purchase of real estate properties was among the most preferred forms of investment in Bulgaria in 2015, when 20% of all property deals were made with an investment purpose. In Bulgaria’s big cities the profits of those who rent their properties amount to 4%-5.5% per year, Tihomir Toshev said and added:

“People are interested in buying real estate in the big cities, because they make money on rent and the prices of their homes have been rising constantly since the end of 2014. According to expert forecasts, the prices of those properties will continue to grow in the nearest future.”

Other investment products will become more attractive and popular, yet the process will be very slow. People who decide to invest some of their savings in mutual funds are very cautious. The mutual funds are companies which unite groups of people and invest their money in various financial instruments such as shares, bonds, securities, etc. In the beginning, people invest small amounts and follow the trend of that market. However, experts believe that in 2016 the mutual funds will be the second most preferred form of investment after the real estate properties. In Tihomir Toshev’s view, it is unlikely that another bubble at the Bulgarian property market will occur:

“When speaking of the real estate market, there is always a possibility that investors may start bad and difficult projects, or build too many homes, as it happened in the period 2006-2008. Currently, however, there are no indications that such a scenario may repeat. Construction companies and investors make precise decisions about where to fulfill a given project and what types of apartments to sell. The demand of newly-built homes is huge and every good project is sold way before the building reaches the stage when state authorities issue the authorization for use. It means that currently the real estate market is in high demand of good quality new buildings, especially in the ten biggest cities. The prices of these homes increase between 3% and 6% per year, which is quite normal. We are not witnessing a sharp price increase to the tune of 20%-30% on an annual basis, as it happened between 2004 and 2008. That is why we may conclude that the property market in Bulgaria is stable and home prices are reasonable.”

English: Kostadin Atanasov