Bulgaria’s upcoming transition to the euro continues to attract significant public attention and discussion. The issue gained further momentum after the European Commission and the European Central Bank published their Convergence Reports on 4 June 2025, confirming that Bulgaria meets the Maastricht criteria and is ready to adopt the euro as of 1 January 2026.
At LEXDIA, we have seen a steady increase in client inquiries related to the legal consequences of the euro adoption. This prompted us to launch a dedicated series of articles addressing the most common questions surrounding the transition. In this piece, we focus specifically on mortgage loans—what will change, and just as importantly, what will remain exactly the same.
Automatic Conversion, No Renegotiation
Under the Bulgarian Law on the Introduction of the Euro, all loans granted in Bulgarian levs—or containing a euro currency clause—will automatically be treated as euro-denominated loans from the date the euro is officially introduced. The conversion will take place using the fixed exchange rate of BGN 1.95583 for EUR 1, with rounding carried out strictly in accordance with statutory rules.
What is crucial to understand is that this conversion does not give banks or financial institutions the right to renegotiate existing loan terms. Loan duration, interest rates, and applicable fees cannot be changed in a way that places borrowers in a worse financial position than before the euro transition. These protections apply equally to banks and non-bank lenders, including leasing companies.
In short, the adoption of the euro does not, by itself, alter the substance of existing loan agreements.
What About Interest Rates?
Whether anything changes depends on the type of interest rate agreed in the loan contract.
Fixed interest rates remain exactly as agreed. If your mortgage carries a fixed rate, it will continue to apply after the euro is introduced.
Variable interest rates, on the other hand, are typically linked to a reference index or benchmark. If that benchmark ceases to exist due to the currency change, it must be replaced with an alternative. Importantly, the law explicitly states that this replacement cannot result in a higher interest rate than the one applied immediately before the change.
In practice, most mortgage loans in Bulgaria combine an initial fixed-rate period (often the first three to five years) with a variable rate thereafter. The variable rate is usually calculated based on a reference interest rate, formed by one or more indices plus a fixed margin agreed in the contract.
Which Benchmarks Are Likely to Disappear?
Some reference indices currently used in Bulgaria are based on data published by the Bulgarian National Bank or the National Statistical Institute. These indicators are relevant for determining reference interest rates under both the Consumer Credit Act and the Consumer Real Estate Credit Act.
Once the Bulgarian lev is no longer in use, certain lev-based indices will no longer be calculated or published. As a result, banks will need to adjust the reference interest rates in existing loan agreements.
This is where many borrowers’ concerns originate. A common fear is that loans will automatically switch to EURIBOR—the most widely used benchmark in the euro area—which is currently higher than the reference rates applied by many Bulgarian banks.
This concern, however, is largely misplaced.
Bulgarian consumer credit legislation clearly regulates what happens when a benchmark changes materially or is discontinued. Banks are required to inform borrowers of the change and of the new reference rate. More importantly, the overall interest rate applied to the loan cannot increase as a result of this transition.
If the newly selected reference rate is higher than the previous one, the fixed margin under the contract must be reduced accordingly, so that the final interest rate remains the same or lower than before the euro adoption.
To be clear, this does not mean that interest rates will necessarily fall after Bulgaria joins the euro area. Market-driven increases may still occur over time. What the law guarantees is that the mere act of adopting the euro cannot be used as a legal basis to increase interest rates on existing loans.
Outstanding Principal and Monthly Payments
Here, the answer is straightforward: nothing changes in real terms.
Loan-Related Fees
The same principle applies to fees. All charges associated with the loan will be converted into euros automatically. The conversion itself does not justify any increase in fees.
What Happens to Collateral?
When loan obligations are converted from levs to euros, the nominal values of any related collateral—such as mortgages or pledges—are updated through technical registrations in the relevant public registers, including the Property Register and the Register of Special Pledges.
In Conclusion
LEXDIA has extensive experience advising clients on mortgage lending, from the initial signing of loan agreements to long-term loan management. We are happy to assist whether you are considering taking out a mortgage before the euro adoption or have questions about an existing loan.
Get in touch with us via our contact page: https://lexdia.eu/contact-us
This article is provided for general informational purposes only and does not constitute legal advice. For tailored legal guidance, please contact us.