The National Bank of Serbia (NBS) announced that its recent decision to limit interest rates, along with the new Law on the Protection of Users of Financial Services, marks a significant step toward greater transparency, fairness, and security in the financial market. Nevena Sokolović, head of the Banking Control Sector at NBS, explained that the introduction of interest rate caps has reduced installments on existing housing loans by 10 to 25 percent, greatly easing repayment for borrowers.
Sokolović recalled that the European Central Bank (ECB) raised basic interest rates by 4.5 percentage points starting mid-2022, which led to a significant rise in interest rates on euro-indexed loans in Serbia. In response, the NBS limited interest rates on housing loans, which are mostly euro-indexed, with a decision issued in September 2023.
After this measure expired in December 2024, the NBS adopted a new Decision on temporary interest rate limits for credit contracts with natural persons, aligning with the upcoming regulations in the new Law on the Protection of Users of Financial Services. This law permanently and systematically regulates interest rate caps on housing loans and other credit products.
Sokolović highlighted that these measures aim to reduce pressure on borrowers, prevent the rise of problem loans, and maintain financial stability. The law, which came into effect in mid-March 2025, limits interest rates on existing housing loans with variable rates and caps rates on new housing loans—both variable and fixed—at five percent until the end of 2025.
During the transition period of 2026 and 2027, the maximum interest rate on variable-rate housing loans will be the weighted average rate on those loans plus one-fifth. For fixed-rate loans, the cap will be the average interest rate on newly approved fixed-rate loans plus the same margin. Starting in 2028, this margin will increase slightly to one-quarter of the average rate. Compared to other countries with interest rate limits on housing loans, Serbia’s cap remains relatively narrow.
Additionally, a lower late payment interest rate was introduced for overdue financial obligations by individuals, set two percentage points below the standard legal late payment interest rate. The effective interest rate on housing loans is also capped—it cannot exceed the default interest rate defined by law minus 2.5 percentage points. This prevents banks from charging additional fees that would bypass the nominal interest rate limits.
The impact of these measures is evident: nominal interest rates on new euro-denominated housing loans stayed near five percent until March 2025, while rates on existing loans fluctuated around 4.5 to five percent since the September 2023 decision. Without these legal interventions, rates on variable housing loans would have increased automatically to approximately 5.6–5.7 percent.
Sokolović explained that the three- and six-month EURIBOR rates—the main benchmarks for variable loans—were around 2.7 and 2.6 percent at the start of 2025, respectively. Adding the average loan margin of three percentage points, rates would have risen to about 5.6–5.7 percent without the new law.
For cash and consumer loans, categorized as “other loans,” the maximum interest rate is set as the weighted average of existing loans plus one-quarter. The NBS publishes updated maximum nominal interest rates on personal loans twice a year (June 1 and December 1) and updates effective interest rate caps after any changes in reference rates by the NBS or ECB. Banks must comply within 15 days of publication.
Currently, the maximum nominal interest rate on dinar cash and consumer loans is 14.08 percent until May 31, 2025, with the latest limits published on June 1, 2025. The maximum effective interest rate is 15.75 percent—above market rates but designed to protect consumers from excessive charges.
Effective interest rate caps for credit cards are set at 17.75 percent, and for authorized and unauthorized overdrafts on current accounts, the limit is 19.75 percent.
Sokolović noted a significant drop in credit card interest rates on dinar debts, from 22.9 percent in December 2024 to 15.8 percent in March 2025, a reduction of seven percentage points. Overdraft rates also fell nearly 11 points, from 29.1 percent to 18.5 percent over the same period. This represents a major step in curbing excessively high interest charges, reducing rates for the most expensive types of borrowing by over 30 percent compared to previous levels.
Thanks to interest rate limits on housing loans, monthly installments have become more affordable, new loans are more accessible, and the growth of problem loans has been curbed. The share of non-performing housing loans decreased from 1.7 percent at the introduction of the interest cap to 1.26 percent by March 2025.
Limited interest rates also encouraged growth in housing loans, which increased nearly eight percent in 2024—about 45 billion dinars—and continued to accelerate, reaching 9.6 percent year-over-year growth in March 2025.
Sokolović emphasized that the NBS remains committed to protecting financial service users and preserving citizens’ living standards, which indirectly supports financial system stability. She concluded that the law’s goals have been met: preventing excessive interest charges, slowing interest rate hikes in times of rapid increases like those in 2022 and 2023, giving borrowers time to adjust, and encouraging lending through fixed-rate housing loans.
