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Turkey Cuts Key Interest Rate Again – Good News for Property Market

Posted on 19 September 2009

The Turkish central bank has cut its key interest rate by a further fifty basis points. The ninth cut in 11 months now leaves the rate at 7.25%.

Turkey has cut its interest rate by more than any other G20 nation. A recent house price index found that the falling interest rates are having a positive effect on the property market, with house prices rising in many areas.

Economists are expecting a further rate cut of a quarter of a percentage point before this series of rate cuts will end. The Central Bank has said that whether or not they will cut the rate any further depends upon the speed of the economic recovery, which it said will be “slow and gradual”.

The International Monetary Fund said it supports Turkey’s short-term monetary policies, but said if it wants to meet public debt targets it will need to adopt additional measures, including policies to tackle spending pressures.

Turkey has not been keen to implement IMF suggestions. So much so that they have been locked in negotiations since May over whether the IMF would renew its role as guarantor for Turkey through this difficult time. That said: the debate is balanced over whether or not Turkey actually needs the IMF or not.

Further rate cuts are likely in our opinion. As yet there are no real signs that the economy is in recovery, and we suspect the government will continue to reduce the rate until there are. After all, while they have reduced the rate by more than any other G20 nation, the Turkish rate still has a long way to go before it is below 1%.

Those of us who have a vested interest in Turkey property can only continue to rub our hands together with glee, because lower rate means cheaper mortgages, means more people buying property and prices continuing to rise. On top of that the rate coming down tends to weaken the Turkish Lira which means Turkish property becomes cheaper to Brits and other demographs which see their currency up against the Lira.

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