Loans to promote energy efficiency, so-called green housing loans, were one of the few niches that recorded high growth despite the recession.
With the Law on Amendments to the Law on Credit Institutions (under the jurisdiction of the Croatian National Bank) that came into effect on May 15 of this year, it was stipulated that promotional or action interest rates can only be contracted for short-term services. Given that these loans are long-term, banks had to abolish promotional interest rates.
Before the implementation of the new regulation, Zagrebačka banka, which was the first to offer such loans, had in its offer Green loans with a promotional interest rate of 4.5 percent for the first two years of repayment, and after that period, a variable interest rate for housing loans for young people was applied (in May 2013, the variable interest rate was 6.5 percent), so the effective interest rate for the entire loan repayment period was 6.22 percent. – Since May 15, we have redesigned the entire offer of housing loans with promotional interest rates, in accordance with the new regulation, and Green loans still have the most favorable interest rate in the range of housing loans, currently at a variable 5.91 percent (linked to the reference rate six-month NRS1). The effective interest rate with the new interest rate is 6.07 percent, which is more favorable for the client in the long term – they say at Zagrebačka banka.
From PBZ, they responded that the bank continuously adjusts its credit offer, and in this case, the adjustment was made in accordance with the amendments to the Law on Credit Institutions and that they still have housing Energo loans with a variable interest rate in their offer.
From the Croatian National Bank, they explained that “numerous consumer complaints indicated that promotional interest rates and the way they are advertised make it difficult for consumers to assess the actual burden of loan repayment.” – In the case of long-term loans, the short period during which the promotional interest rate is applied has little effect on the actual cost of the loan, while significantly reducing the repayment installment during the promotional offer facilitates the consumer’s decision to borrow. This has led to significant underestimation of the loan repayment burden and wrong decisions among consumers who are not thoroughly familiar with the characteristics of financial instruments, which subsequently caused costs for both them and the bank. In this regard, the actual benefit that consumers would achieve from such an offer was very small, and there was a significant possibility that due to the promotional interest rate, the consumer would choose a product that ultimately results in a higher actual repayment cost. We believe that the bank must disclose the actual interest rate that will apply throughout the entire contractual period, thereby enabling the consumer to make the correct product choice and a realistic assessment of the loan repayment possibilities – they say at the Croatian National Bank.
