Interest rates in Turkey have hit yet another all time low and the central bank plans to make further cuts. The overnight borrowing rate is now just 7.25%, this is now the 11th consecutive month interest rates have been cut. Whilst this is very high compared to UK and Europe etc. it is less than half it was just a year ago.
Many ex-pats in Turkey rely on income from bank interest to survive here, in September last year 150,000TL would earn about 2,000TL net interest per month, now it will take almost 340,000TL (£144,000).
Lower inflation should help those suffering from this tight squeeze but whilst the official inflation rate is less than 6%, electricity prices have rose by 60% in the last year with another big hike of up to 21% starting 1st October.
I have noticed new adverts from Brits appearing in the local Voices newspaper recently, offering services like hairdressing, dog minding, gardening, odd jobs and more. Some British ex-pat have been observed working in Akbuk bar(s). Without proper work permits these people are risking heavy fines and possible deportation, even if they are not paid in cash. The Turkish government is getting tougher on illegal workers, deportation could be devastating for ex-pats who own property here.
So if you are thinking about relocating to Turkey, do your sums carefully, one thing is certain in the near future interest rates will continue to fall and the cost of living will continue to rise.
A little bit of Turkeys financial history . . . 5 years ago banks were paying 33% interest and in February 2002 interest rates were over 50%. Those who had the nerve made real money.
Wednesday, September 30, 2009
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Anyone who relocates to Turkey and has solely relied on interest rates as a method of their only income, have been very naive in my opinion. With the way Turkey is with its fluctuating economy and current world downturn it is certainly a gamble I would not like to take unless I knew I had the financial back up to cope with such situations. To come back to the UK now would be even more difficult as cost of living is so much lower in Turkey and jobs are certainly not easy to find.
ReplyDeleteAnother half a percent was shaved off the base deposit rate on Thursday, the rate is now 6.75%, yet another all time low. Banks are responding quickly by reducing the rates they offer to investors, HSBC now offer 8% gross. Referring back to my previous example of realising 2,000TL per month it will now take approx 365,000TL invested. Economists predict more interest rate cuts to come.
ReplyDeleteThursday 19 November - Another .25% interest rate cut was made by the Central Bank. Now 6.5%, are we at the bottom yet or will it fall even lower?
ReplyDeleteHi Rob it's Barbara from summer breeze, what are the interest rates now, i'll bet they are lower still.
ReplyDeleteHi Barbara.
ReplyDeleteAt the latest meeting (14 Jan) of the Central Banks Monetary Policy Committee they decided to leave the rate unchanged at 6.6%, however they have indicated that inflation would rise significantly in the next two months due to tax adjustments and base effects, hovering above their target for some time. Certainly in the shops prices of some things have gone up a lot, so the next move is likely to be up a little (we hope).
HSBC is currently offering investors 7.75% on a 30-59 day e-deposit account or 7.5% on a t-deposit account before tax, you can get a bit more by shopping around, Garanti Bank are offering 8.75 and 7.75 on their 32 day+ accounts. Still rubbish compared to what we used to get.
The exchange rate yesterday was 2.39 TL - £1.
PS. We are going over to your bar tonight to do a bit of “Freeloading” we promise we wont use the pool. Tonight’s temp forecast is 0°C, tomorrow night -2°.
To be honest I can't complain we benefit from low rates in the UK. The only hope for investors is once we begin to come out of recession the rates will again climb. Matt Clempner
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