It will be difficult to convince KKM to leave KKM

While the economic management was looking for ways to end the Protected Deposit of Foreign Exchange (KKM), the regulations introduced by the Central Bank (CBRT) the previous weekend were the first step out. However, the extent to which the decisions taken will reduce KKM, whose monthly cost exceeds 10 billion dollars, depends on the increase in interest on deposits in TL.

To make such a transformation, banks needed to hold additional securities to convert their TL transfer KKM accounts into TL deposits at maturity. Therefore, with the goal of converting 50 percent of the overdue KKM into TL deposits, the banks started the race for the interest on the deposits.

NEGATIVE INTEREST BARRIER

The monthly interest rate on deposits in public banks, which last week was 28-29 percent, increased to 35-36 percent at the beginning of the week. Some private banks, on the other hand, if the customer transfers 50 percent of the TL KKM to a monthly TL deposit at maturity; It pays 40 percent interest for 32 to 91 days and 45 percent for 92 to 95 days. However, with the effect of the rapid rise in the dollar after the elections, it will not be easy to convince savers, who in August yielded up to 140 percent in three months.

Increased deposit rates may allow holders of protected currency deposits to switch to TL deposits to a large extent. However, the fact that the Central Bank still keeps the official interest rate at a deeply negative interest rate compared to inflation makes it difficult for the owner of savings, who moved from TL to KKM, to return.

The CBRT’s inflation forecast for the end of 2023 increased to 58 percent. Even if the interest on TL deposits rises to 45 percent, as a result of inflation above 58 percent, the saver may have to close the year with a serious negative real return of more than -13 percent.

INTEREST BRAKE ON HOUSING LOANS

After the sharp rise in interest rates, the share of home loans in individual loans declined 30.4 percent annually in June. Consequently, as of June 2023, the monthly interest rate on housing loans increased to 1.84 percent and the compound annual interest rate reached 24.45 percent, reaching the highest value since January 2019. After this interest rate increase, the share of home loans in personal loans decreased by 30.4 percent in June 2023 compared to the same month a year earlier and decreased to 20.1 percent.