With the National Bank accelerating the pace of interest rate hikes, auto loan approval rates may be on the decline!
The National Bank has already raised interest rates twice this year, that is, 0.25% in May and 0.25% in July, and now the overnight policy rate (OPR) has been raised from 1.75% to 2.25% p.a. The rate hike by the NBG will cause banks to be more cautious when reviewing auto loan applications.
Based on historical data, the overnight policy rate (OPR) was 2% from February 2009 to February 2010, when the auto loan approval rate was 60%, meaning that 60% of loan applications could be approved. However when the OPR increased to 3% between May 2011 and June 2014, the approval rate for auto loans had dropped to 51%.
When the OPR increases further, the installments for auto loans follow suit, leaving borrowers with higher monthly installments to bear. Banks will be more cautious when reviewing auto loan applications, which is the main reason for the drop in auto loan approval rates.
The OPR adjustment will only affect new auto loans, existing auto loans will not be affected unless you have a floating loan.
The government is looking at implementing a targeted gasoline allowance mechanism, which means that only those people who are truly in need will be entitled to the gasoline allowance. This adjustment will result in some people not being eligible for the gasoline subsidy and thus having to pay more to purchase gasoline. This will increase the cost of purchasing a car and may reduce the number of applications for auto loans.
