The home loan portfolio is growing slightly in Estonia and Lithuania, but shrinking in Latvia

In 2014, the home loan portfolio grew by 2.8 per cent in Estonia and 1.8 per cent in Lithuania. Growth was faster than in previous years and is continuing to accelerate, as revealed by the freshly prepared SEB Baltic Household Outlook.

The volume of new bank loans in 2014 was 19.5 per cent higher in Estonia and 12.3 higher in Latvia than in 2013. According to the statistics by the Association of Lithuanian Banks and the organisation Būsto paskolų draudimas (UAB), which joins the banks issuing home loans, in Lithuania, the volumes of new loans increased by approx. 30 per cent in the first half-year and by 20 per cent in the second half-year.

In Latvia, the volume of loans paid back exceeds the volume of new loans, which is why last year the portfolio shrank by 6.7 per cent as at the end of 2013. Some Latvian families continue to struggle with the loan obligations taken before the economic crisis, and this affects the development of the entire loan market. At the end of 2014, the proportion of home loans overdue for more than 90 days amounted to as much as 8 per cent of all home loans in Latvia. Based on the data from July 2014, the rate of home loans overdue for 60 and more days amounted to 6.5 per cent of the portfolio in Lithuania. In Estonia, this figure amounted to only 1 per cent of the entire volume of home loans.

“Interest towards home loans has increased in all three Baltic States, and one of the major reasons for this might be the continuous objective need to improve living conditions. According to European Union Statistics on Income and Living Conditions (EU-SILC), the living conditions of the people of the Baltic States are poorer than the European Union average – our average standard of living is two-thirds lower than the European average,” said Triin Messimas, financial expert at SEB Estonia, explaining the need for home loans.

On the other hand – compared to the first half of the 2000s, people are far more careful today when making loan decisions because they still remember the difficulties in the repayment of loans after the economic crisis. The volumes of new loans are rather at the pre-boom level. A significant share of real estate transactions are funded by the buyers from their own resources. If the unstable political situation in neighbouring countries does not significantly affect the sense of security of Baltic families, an increase in the volume of new home loans and contracts can be expected to be seen throughout 2015. In Estonia and Lithuania, however, credit growth will probably remain below the average wage increase, which means that the relative loan burden of households will not increase compared to income.

The full Baltic Household Outlook can be read in English, here:  www.seb.ee/BHO_aprill_2015


Additional information:

Triin Messimas, financial expert at SEB Estonia +372 66 55 167, triin.messimas@seb.ee
Evelin Allas, SEB Eesti Communications Manager +372 66 55 649, +372 51 11 718, evelin.allas@seb.ee