Is now the right time to get a loan? - Base interest rate of 2.5%, the lowest since 2022. Borrowing costs ease
The Bank of Albania has cut the key interest rate to 2.50%. This is the first time since November 2022 that the Central Bank has set such low key rate levels.
Lowering the base interest rate automatically increases lending to the economy. But what does this mean specifically for citizens?
If a Central Bank lowers the base rate, commercial banks are also likely to lower lending rates for citizens. This means that they will be able to obtain loans at more favorable interest rates. However, lower base rates negatively affect deposits, as they mean that citizens will receive lower returns on their bank savings.
Since November last year, the Bank of Albania has kept the key interest rate at 2.75%. From 2020 to 2025, the highest key rates were recorded in 2024, reaching the level of 3.25%.
Despite the fact that the base interest rates have been very high in 2024, borrowing has continued to grow steadily, especially in the real estate sector. For the latter, the Bank of Albania has set limits on the maximum credit that banks can provide to finance the purchase of a house by individuals.
Meanwhile, the reduction in the base rate will favor borrowing from other sectors and for other purposes, not just for purchasing a home.
The lowest base interest rates will result in 2020 and 2021, which will drop to levels of 0.5%. This has made borrowing much cheaper for citizens during that period.
The Bank of Albania moves the base interest rate to keep inflation under control, i.e. price increases, stimulate economic activity, and more.
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