This year has seen a notable increase in both bank borrowing and personal savings in the Federation of Bosnia and Herzegovina (FBiH). Citizens have significantly increased their debt with banks, particularly in the areas of housing and general-purpose loans, according to the FBiH Banking Agency. As of the first three quarters of 2024, non-purpose loans in FBiH rose by 5.8%, while housing loans surged by 13% compared to the end of last year.

The growth in housing loans indicates a robust demand for homeownership, alongside the appeal of stable lending conditions in FBiH. For the past five years, lending conditions in FBiH have remained relatively steady, resulting in stable interest rates. As of September 30, 2024, banks in FBiH offered general-purpose consumption loans at an average effective interest rate of 7.2%, while housing loans were provided at a comparatively lower rate of 4.3%.

In addition to increased borrowing, citizens are also saving more. The total deposits held by FBiH citizens reached 12.6 billion KM by the end of September 2024, marking a 5.7% increase compared to the end of the previous year. This growth in savings suggests a trend toward greater financial security among FBiH citizens, as they balance increased borrowing with a focus on building financial reserves.

Regarding the potential influence of the European Central Bank’s (ECB) interest rate policies, the FBiH Banking Agency clarified that local interest rates are not directly tied to ECB rate changes. Regulatory measures by FBiH’s entity banking agencies have helped prevent drastic increases in loan interest rates, even as rates for previously variable-rate loans have seen some minor adjustments. The agency highlighted that, for most loans, banks opted not to increase rates by more than 2%, despite the ECB's reference rate adjustments.

Looking ahead, the FBiH Banking Agency suggested that there could be a reduction in interest rates for variable-rate loans if the reference rate decreases below the 2% threshold. However, they emphasized that this adjustment would only apply to loans currently tied to variable interest rates.

On the topic of banking fees, the agency stated it does not have direct control over specific fees charged by banks. However, it noted that current market trends, along with an increase in the volume of banking services, suggest that there could be room for adjustments in banks’ pricing policies. The agency’s guidance hints at potential future changes in banking fees, although these would ultimately depend on the individual decisions of FBiH banks.