Turkey's banks are issuing mortgages at a loss since President Erdogan called on commercial banks three-month to slash their mortgage loan rates in an attempt to revive the housing market and spur growth. However, once the banks obliged, they have seen borrowing costs rise considerably, which they are not passing on to home buyers. The rates the banks have to pay for last August deposits – a major source of funding – have risen to 11.3%, which is about 19 basis points higher than the average rate they charge on mortgages.
Turkey's banks are issuing mortgages at a loss since President Erdogan called on commercial banks last August to slash their mortgage loan rates in an attempt to revive the housing market and spur growth. However, once the banks obliged, they have seen borrowing costs rise considerably, which they are not passing on to home buyers. The rates the banks have to pay for three-month deposits – a major source of funding – have risen to 11.3%, which is about 19 basis points higher than the average rate they charge on mortgages.