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Saturday October 1st, 2022

Sri Lanka orders housing loans to be given at prime lending rate

ECONOMYNEXT – Sri Lanka has ordered that housing mortgages be given to salaried employees for five years at the prime lending rate changing a previous price ceiling of 7.0 percent ceiling imposed in 2020 in the latest in a series of interventions in credit markets.

The new interest rate will be the “monthly Average Weighted Prime Lending Rate (AWLR)” for the first five years of the loan, the Central Bank said in a direction to banks.

The AWLR was 8.61 percent in December 2021.

After the first five years, the loan should be priced at AWPR plus 200 basis points.

“The monthly installment for the first five years shall be computed considering AWPR prevailing at the date of disbursement as the interest rate for the entire tenure of the loan,” the direction said.

Sri Lanka has also capped interest rate on foreign currency deposits at 150 basis points below the one year Treasury bill yield.

Sri Lanka is facing currency pressure after the central bank credit injected over 1.6 trillion rupees over two year to keep interest rates down and finance the deficit. (Colombo/Jan03/2021)

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