interesting times ahead in trnc with possible new "bank interest rate

yorgozlu



Joined: 16/06/2009
Posts: 4437

Message Posted:
10/11/2011 23:09

I have been trying to follow and been watching tv programmes for the past few weeks regarding proposed new law with bank interest rates,which'll also be covering the existing cases.

The proposed max can be charged to borrower will not be more then 4 times the amount (inc borrowed amount),based on lira,and no more then double(?) based on foreign currency.



so far so good,since in the event of this new law passing the parliement and becoming a law'd put a stop to alot of peoples homes being at risk or being auctioned,and it'd include the existing cases........and it'd have some sort of conclusion in the next 20 days,as promised by the pm.





NOW,concidering all above happened,how'd that affect the depositers?

TRNCvictim


Joined: 17/08/2010
Posts: 1417

Message Posted:
10/11/2011 23:30

yorgozlu



I am trying to understand and follow what you are saying regarding the new law? covering bank interest rates!



so far (not good) since in the event of the new law being passed in government or parliement and becoming law would put a stop to peoples homes being at risk or being auctioned!



and it would be retrospective? coming to a conclusion in the next 20 days as promised by the PM!



I am with you so far, but how would that affect depositers?



Any God only knows :-(

ang1706


Joined: 28/01/2009
Posts: 570

Message Posted:
10/11/2011 23:54

Yorgozlu,



Thanks for the info and a great post and hope it becomes a reality.



Grateful if you could continue watching your intel and hope to read more updates.



This is another step in the right direction and hope it will help everybody in the long run and that the current problems are never allowed to happenagain!!



For depositers, there always was a huge indifference and known that it could not be sustained.



I now get 8% on Lira and 3.25% on Sterling with 10% tax, so interesting to see if there becomes a standard base rate. At one time I got 27% ON LIRA!!

Stonehousepub


Joined: 21/05/2009
Posts: 755

Message Posted:
10/11/2011 23:55

Interest rates for savers will also be drastically reduced.



1% on foreign currency and maybe 3% for tl deposit accounts ????

yorgozlu



Joined: 16/06/2009
Posts: 4437

Message Posted:
11/11/2011 00:08

Ozi

Thats inevitable,being realistic.However,as much as the new law'd mean alot of people'd be able to relax,regarding their properties,how'd that affect them in respect of living here,based on the fact some of us are living here,depending on the income generated from their deposits in banks?

BizziLizzi


Joined: 02/08/2011
Posts: 855

Message Posted:
11/11/2011 00:24

Oh dear. Reduced interest rates for savers. Seems to me that the TRNC are following a bad example from the UK of penalising the thrifty to bail out poor fiscal policies and the less prudent.

yorgozlu



Joined: 16/06/2009
Posts: 4437

Message Posted:
11/11/2011 00:29

BizziLizzi



Nothing,regarding reducing savers interest rates,hevr been mentioned so far.............just thinking of the scinario.

Stonehousepub


Joined: 21/05/2009
Posts: 755

Message Posted:
11/11/2011 01:39

yorgo



If the proposed changes to the bank interest rates are followed through (which does look very likely) then the investors with deposit accounts will be directly effected being hit with much reduced interest rates I can only assume that these people that depend on the interest as an income will inevitably be faced with some financial difficulties.



Investors will be forced to look for alternative means (of which there is not much of in the TRNC)....



The banks will really have to think this through extremely carefully as the consequences could be devastating for some of the not so strong financial insitutions in the TRNC.

pollymarples


Joined: 08/08/2010
Posts: 1778

Message Posted:
11/11/2011 06:39

Could this be the usual, let's us think of a way around the mortgage problem that makes it look like no one is backing down.



If retrospective would that reduce K5'S BUILDERS/landowners mortgages to 1O0,000 X 4 = 400.000 tl and

£1,600 x 2 = £3,200 so roughly the total debt would be making the total nearer 410.000 TL, somewhat less than the 2,077,000 TL at the time of the auction. If they sold the thre houses given to the landowner they could more than realise that.

Jovial_John


Joined: 31/01/2009
Posts: 1024

Message Posted:
11/11/2011 07:10

Surely it is easy enough to open a bank account in Turkey - interest rates would then be unchanged and depend solely on the lira's international value. The TRNC government can dictate to Cyprus banks but they do not control interest rates on the lira.

hodgeliz


Joined: 16/10/2010
Posts: 278

Message Posted:
11/11/2011 07:14

I really think you need to stop scaremongering, I know you said you are thinking outside the box, but please try to put a correct slant on it,

Q/ do you see Turkey altering it's interest rate because of a law passed in the TRNC, personally I dont think so, and the Turkish interest rate is the one the central bank in the TRNC links to.

yorgozlu



Joined: 16/06/2009
Posts: 4437

Message Posted:
11/11/2011 07:36

hodgeliz

That's fair enough,but my common sense also tells me that investors interest rates'd be effected accordingly.



pollymarples



It'd cover the existing cases but nothing's been mentioned regarding cases that already ended.And the final amount on existing cases'd have infalation added to it that accured over the years,which I think is fair enough.

Jovial_John


Joined: 31/01/2009
Posts: 1024

Message Posted:
11/11/2011 07:48

hodgeliz

Yes the central bank interest rate is set by Turkey but that only functions as a guide and each bank is free to use any interest rate it chooses. That is why different banks offer different rates - and it is true for any currency in the world. But in the same way that a government can put a cap on interest rates for borrowed money they can cap savers' interest rates. Even if they couldn't, they could simply charge 60 or 70% tax on earned interest and effectively keep interest rates down whilst filling their coffers at the same time. I remember when Labour's Dennis Healey charged 95% tax on unearned income which includes interest.

marydoll19


Joined: 15/10/2010
Posts: 45

Message Posted:
11/11/2011 08:10

Can i ask this please

JJ & Yorg by your simplistic formulae, people will all be shifting their savings to Turkbank who will in all probability stick with Turkey

would this be likely ?,

different banks in TRNC offer different rates but only by a percent or so not by 5or 6 or even 7 percent.

I think also as all banks in TRNC are governed by the central bank, you will find that they will be well policed regarding interest payments as the central bank will not want to get too much of a bloodied nose in the event of default surely.

Groucho



Joined: 26/04/2008
Posts: 7993

Message Posted:
11/11/2011 08:15

If it leads to the banks not lending money at usurious rates to 'developers' using houses already sold to third parties as collateral (which is fraud) then it's a good thing.

pollymarples


Joined: 08/08/2010
Posts: 1778

Message Posted:
11/11/2011 08:18

yorg. where did you get the idea that K5 case had ended,,,the fat lady has not even begun to sing.



Next hearing 29th November at Girne District Court. May even prove eventually that the mortgage was illegal, now there is a thought. We all know it was anyway, at least in every civilised country in the world.

Jovial_John


Joined: 31/01/2009
Posts: 1024

Message Posted:
11/11/2011 09:52

Marydoll19

Firstly, I am not suggesting that savers' interest rates will be capped - there is a huge margin between interest rates paid and charged so a cap on the interest charged would not necessarily mean a reduction in in the savers' rate.

However, if Yorg's prediction came true then every bank in TRNC, whether Turkish or Cypriot, would be in the same boat. However, I already have bank accounts in the UK, Thailand and TRNC and I could equally open an account in Turkey which would not be subject to any rules made by TRNC and which I could easily operate via the internet.

wanderer


Joined: 05/02/2009
Posts: 1653

Message Posted:
11/11/2011 11:58

On the deposit rates they are set so that TR can work internationally

If they are too low there will be an outflow of foreign money with an adverse effect on the TR economy .

The TRNC will follow the TR so deposits should not be adversely affected

Its the exchange rate to sell Turkish exports and imports

yorgozlu



Joined: 16/06/2009
Posts: 4437

Message Posted:
11/11/2011 16:16

Groucho

I agree,however there are 22000 cases pending,all about bank extortous interest rates.Legal or illegal yet to be proved,at least in the eyes of the 'law'.

Tenakoutou



Joined: 27/07/2009
Posts: 4110

Message Posted:
11/11/2011 18:32

I don't believe for a minute that the 'Rich Club' will wear this one!!!

thetruth


Joined: 11/01/2009
Posts: 268

Message Posted:
11/11/2011 21:28

This will cause most banks here going bust.people will not invest in banks here,money will go elswere.how can you loan money at less than turkey are paying to invest in there banks.it can only work if turkey set the bank lending rate,that said if thay cut the rate the lira would be worth less,ok for exports but not for imports.at the moment the government are getting 10 percent on all investers money in banks,what are thay doing with all this money!!!!!!!!!!!!

spider


Joined: 03/01/2009
Posts: 5527

Message Posted:
11/11/2011 22:00

The government are borrowing from the banks for wages but do the banks get any back..or is it just like the builders,and they never get a penny back ?





Hmm......







Spider,X

blade


Joined: 19/06/2010
Posts: 1286

Message Posted:
12/11/2011 09:35

If the borrowing rate is made better then the property market should benefit.

If the savings rates of interest are cut it would effect each and everyone of us. Less disposable income would effect not only those who's monthly income would be cut, but also any business here. Then the TRNC would lack growth.

spider


Joined: 03/01/2009
Posts: 5527

Message Posted:
12/11/2011 09:49

Blade I understand what you are saying but the only money the banks are getting is ours,



the borrowers seem to get away with not paying anything back ! then the banks take back villa's. !





Thank goodness I do not invest in the banks here.





Spider,X

blade


Joined: 19/06/2010
Posts: 1286

Message Posted:
12/11/2011 10:00

Spider,

My hubby was recently speaking with a manager of Turk bank. She was saying they have so many kochan held by them where people just have done a runner and not paid.

I have had two TC's both who want to buy my place but neither have been able to get a mortgage. They are just not lending. So anything that can improve that can only be good.



The downside to that is if they cut interest rates for deposits, then we will all suffer.



You have the right idea, neither do i invest in any bank here.

dvdjohn


Joined: 27/10/2011
Posts: 128

Message Posted:
12/11/2011 10:05

You are not thinking of leaving us Spider, hope not.

Swany



Joined: 01/12/2009
Posts: 255

Message Posted:
12/11/2011 11:10

Interest rates on deposits reflect the interest rate set by the central bank.



In the UK base interest rates is 0.5% which makes 12 month savings rates at about 3.5% = 3% more.

Mortgage borrowing in the UK is around 4% variable rates.

The Turkish base rate is currently 5.75% which makes 12 month saving rates at about 8.5 = 3% more.

Mortgage borrowing in the TRNC is around at least 20% variable rates (that is not a corroborated fact).



In short the banks here have better margins on between what the lend and what is deposited but between the official interest rate and the depots rates there is not much difference to the UK.



So the question is could the bank afford to continue to give current savings rates if the interest they could charge on loans were cut… I think the main land Turkish banks will but some of the local banks may have to change their business model like have less mangers, branches and costs like what has happened to banking in UK in the 90s.

Swany



Joined: 01/12/2009
Posts: 255

Message Posted:
12/11/2011 11:13

The reason there is no possibility for domestic mortgages in the TRNC is due to the fact it is near imposable for a property to be sold once it is reposed as the legal proses is so long winded and there are not the government officials available to carry out the court orders. Some banks have large bad debts and the security is property which is illiquid. (re 25)

Banks are much happier to lend on cars as they can be easily liquidated (sold) and whilst the loan is outstanding the car is the property of the lender.

blade


Joined: 19/06/2010
Posts: 1286

Message Posted:
12/11/2011 12:09

From what i have been told some banks are giving mortages more easily than other here. A lot depends on which type of land it is, to what they will lend against it. Along side the type of job and income the borrower has.

I'm not so sure the cars being sold is quite the case anymore. Friends of our have a car sales in Lefkosa

and they tell us times are very very hard right now.

I do have another friend who purchased a merc on credit from the bank, they were calling him days before the payments were due to make sure he didn't forget to pay them. Appears they are on peoples case to pay up on time, it never use to be like that.