08 / 2023

Turkey Reduces Mortgage Rates

Turkish Mortgage Rates Reduced!

Historically If you have ever thought about taking out a Turkish mortgage to buy a property, you will probably know that the lending interest rates and term time was extremely prohibitive. The typical interest rate hovered around 27% and the period in which to repay the loan around 60 months. The other negative factor was the LTV rate (Loan-To-Value ratio) which was around 50%. This basically means the maximum amount of money one could borrow to buy a property would never be more than 50% of the property selling price.

The consequence of these factors had a stifling effect on the house-building industry. People on a National Minimum Wage found it virtually impossible to buy property because they couldn’t afford the mortgage repayments. A stagnant housing market has had a dramatic negative knock-on effect for the whole of the economy. The lack of investment in property means also reduced sales for domestic white goods, electronics, furniture, soft furnishings, decorative items etc etc.

Construction has always been the pillar of the Turkish economy but statistics show that house sales have declined by 14% and new mortgage sales reduced by 35% so something had to be done.

President Tayyip Erdogan Calls For Action In a meeting with two of Turkey’s largest state-owned banks,

Mr Erdogan urged them to boost lending to stimulate the real estate market. He asked them to “make borrowing easier in the real estate sector”. Ziraat, Turkey’s biggest bank responded by lowering monthly interest rates from 1.23% to 0.98%. The bank also increased the maturity date to ten years. Other banks have now followed in their footsteps.

Current Status

Now, a quick internet search reveals the market for real estate lending has become increasingly competitive with all major Government banks offering incentives to new applicants. Typically, our research suggests that currently, mortgage interest rates have dramatically reduced to around 12%, LTV rates have been increased up to 70% and repayment terms now up to 15 years. This represents a massive unprecedented movement in the mortgage market.

We should emphasise however that our research suggests at the time of writing this article that these new incentives are only being made available through the Turkish Government Banks. This means Ziraat Bank, Halk Bank, and Vakiflar Bank are currently offering the cheapest rates. Turkish Private Banks like Akbank, Anadolu, Fibabank, Sekerbank, Turkish Bank, Turkish Economy Bank, Yapi Kredi Bankasi have not, as yet been able to provide the same incentive levels. We are also waiting to see if the Foreign Investment Banks such as HSBC, Finans, BBVA, Garanti, Deniz, Citibank, Deutsche Bank will follow suit by introducing similar rates in line with the Government initiatives.

Turkey has around 1.5 million unsold houses. Perhaps now is the best time in over ten years to buy property here in Turkey? With competitive mortgage rates in place, and price incentives from builders, owners and agents, the industry will once again start to improve.

The Future

We asked Oludeniz Homes Managing Director, Ogun Eldemir, his thoughts on the future. He commented as follows:

‘The housing market has been stagnant for too long now. Ordinary people just could not afford to get themselves onto the property ladder. The recent incentives from the Government Banks are a real blessing. We are already seeing many more enquiries from people interested in buying property. The Government have recognised it needed to do something to stimulate the housing market and, along with the positive steps taken by major lenders, we look forward to the future with more optimism’.

Foreign Investment

One other major benefit of the changes is that ex pats looking to buy property in Turkey can now take advantage of the new borrowing rates. Property sales to foreigners has always been quite buoyant but, over recent years, Turkish property fell out of favour with people from European destinations. This is now a game-changer. Local estate agents in the Fethiye area are at the forefront of the local economy. It is they who are the front-line soldiers attempting to stimulate the local economy with property sales to foreigners, either as holiday homes, retirement homes or simple investment plans. At least now they have some extra ammunition to help people realise their dreams of buying a property here in Turkey.

If you are reading this and would like further information about buying a property in Turkey. Please get in touch with Oludeniz Homes.