Interest rates are at historic lows

The Dominican Republic’s financial system continues to reflect low lending interest rates, which is the interest rate applied to loans, a behavior that is also maintained in the passive interest rates, which are the yields paid on deposits and placements of financial certificates and other instruments in the banking sector and savings and loan associations.

The downward trend continued in commercial, personal and consumer loans, as well as in preferential and mortgage financing. The latter line item rose very minimally on September 7 of this year in relation to 2020, although it is still well below 2019, when the rate was at 11.12%.

The drop in mortgage and/or development loans was reflected in 2019 and 2020, with average rates of 9.01%; and 9.36%, respectively, and although it contrasts with the 10.31% average on the 7th of this month, official data reveals that this month negotiations were closed at 9.22%, the lowest rate since 2020.

In January August 2021, the closing mortgage rate was 9.36% and averaged 9.68% in the first week of this September. In the case of mortgage loans, the great boom in the construction sector, which has been the most dynamic activity in the economy, is inferred.

In addition, the financial intermediation entities maintain low rate offers depending on the durability of the new financing and also have fixed rates for six months, one and three or more years. Some institutions have offered to eliminate closing costs, especially in the case of affordable housing, and fixed rates for the life of the loan.

Banks are now posting rates at historic lows since 2000, even below savings and loan associations. In August of this year the weighted average rate closed at 8.46% and to date is at 9.68%, according to commercial banks, with data from the Central Bank.

Another reason for the slight increase in new loans arranged in September may be due to the fact that, once the resources destined for these purposes from the liquidity facilities have been exhausted, they are being channeled with their own resources.

However, banks such as Reservas have made offers from 5.8% for six months, 7.50%, 7.80%, 9.80% and 11.80%, with one, three, five and ten year terms. Other banks will come out with new offers.

According to Central Bank statistics, loans granted this year by financial entities up to the first week of September this year remained at an average of 8.67% for the commerce sector, a behavior of six points less if compared to the rate of 15.45% that had reached in the whole year 2020 and 11.43% in 2019.

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