Lending rates go up: For the second time in five months

Published: Tuesday August 5, 2008

Consumer loans for cars and houses are going to cost more as commercial banks have increased their lending rates for the second time in five months.

First Citizens and RBTT Bank have already announced an increase in their commercial lending rates, from 12.25 per cent to 12.75 per cent effective August 1.

The other commercial banks are expected to make official announcements on the increases shortly.

On April 1, the banks increased their prime lending rate by 50 basis points from 11.75 per cent to 12.25 per cent.

Both increases have been blamed on rising inflation and stronger measures by the Central Bank to curb rapid consumer spending.

RBTT Bank said in a published statement yesterday that the increase in its base commercial lending rate was "concurrent with the increase in the Central Bank repo rate and in keeping with changing market conditions".

Bankers Association president and Republic Bank's managing director Bernard Dulal-Whiteway attributed the lending rate increase to tougher monetary policy measures by the Central Bank.

On July 25, as it announced that inflation reached 11.3 per cent, the highest in 14 years, the Central Bank increased the repo or overnight lending rate to banks from 8.25 per cent to 8.5 per cent.

It also increased the cash reserve requirement from 13 per cent to 15 per cent for commercial banks.

More cash from banks being held in the Central Bank means an increase in costs for banks, Dulal-Whiteway told the Express in a telephone interview yesterday.

The Central Bank's measures to tighten liquidity also means that banks will now charge more for consumer loans as well as new mortgages for homes.

While borrowers will pay higher rates, savers may get better returns.

Dulal-Whiteway said following the increase in inflation reduction measures, Republic Bank also increased its interest rate for instruments like fixed deposits from 6.5 per cent to seven per cent to encourage saving and curb spending.

"But as long as inflation continues to be in double digits, lending rates will continue to rise," he said.


Source: Trinidad Express Newspapers
http://www.trinidadexpress.com/index.pl/article_business?id=161360069