An unprecedented global rate cut wave failed to take Bulgarians anywhere near cheaper bank loans.

The European Central Bank slashed its benchmark lending rate to 2.5 per cent by cutting 0.75 percentage points, its biggest cut ever. The Bank of England took its rate down by one percentage point to two per cent, last seen in 1951, while Sweden ventured further than anyone else, reducting its key rate by 1.75 percentage points to two per cent.

The UK's banking watchdog has never cut the rate below two per cent but even a zero rate will not be out of the way next year as the British banking system grapples with the worst financial crisis in eighty years.

Bulgarian banks seem as if they were on another planet, intent on building up deposits to make loans with only a trickle flowing in from abroad, according to bankers.

The tight race for savers needed to replenish resources prompted high deposit interest rates but also lifted the cost of lending. Some bankers say this "deposit war" should end, now that some lenders offer crazy annual rates of 9-9.5 per cent on three-month deposits.

Local bank association chairperson Violina Marinova told Dnevnik in an interview that further hikes on both loan and deposit rates would be unwise.

Consumers could hope for lower loan interest rates only if Bulgaria's risk premium decreased, said UniCredit Bulbank head Levon Hampartzoumian.

Brokers and financiers doubt that Europe's rate cuts will kick-start the Bulgarian economy and equity market as the smaller loan expenses benefit eurozone markets.

Still, the ECB's rate cut decision is a sign that the watchdog is doing its best to ease tensions and cut funding costs of the European economies.

Source: Dnevnik.bg