Interest rates on loans are unlikely to leap substantially any time soon, the Bulgarian National Bank (BNB) said in its economic outlook report released on April 16. The report is a quarterly review of economic and banking system developments in Bulgaria.

The central bank based its forecast on the expected end of interest rates hikes in the euro-zone.

According to the central bank's experts, the higher costs of financing, caused by the global credit crunch, did not have as strong an effect on Bulgarian banks’ loan interest rates as expected, mainly because of the strong compeition in the Bulgarian banking sector.

Lenders prefer to increase interest rates on existing loans because the fees charged for early loan repayment make loan re-financing economically unsound.

Last month, a number of large banks ventured for one-time increases of interest rates on loans, ranging from 0.25-0.5 to one percentage points.