The return fetched by newly-opened lev and euro-denominated deposits in Bulgaria has swelled by 40.5 per cent in the year up to July 2009, according to central Bulgarian National Bank statistics.

At a time when banks raced to sweeten terms in a bid to appeal to depositors who could satisfy their lust for liquidity, the average percentage rate (APR) of consumer and housing loans in the same currencies billowed by 24.2 per cent and 11.4 per cent, respectively.

APR on local-currency home loans rose by 15.3 per cent in the 12 months to July and their euro-denominated counterparts have gone up by 7.5 per cent. Consumer loans have seen APR soar by 24 per cent if in leva and 24.4 per cent if in euro.

Rates on lev-denominated term deposits have surged by 37.8 per cent, while euro-denominated products generate 43.1 per cent higher return.

However, local lenders seem to have run out of fuel to sustain the formidable deposit war any further and rates have been cooling off for three months in a row.

As at end-July, the average effective annual interest rate was 7.99 per on local-currency term deposits and 6.34 per cent on euro-denominated offers.

The sliding cost of attracted resources should take some burden off the shoulders of loan borrowers but bankers say economic uncertainty makes it hard to herald the fragile declines as a new trend.

Some market insiders only see sweeter terms on the horizon as banks are holding their breath until the economy is safely out of the woods. Others reckon that even if rates do decrease, they will hardly return where they were before the economy imploded.

Source: Dnevnik.bg