The average interest rate on housing loans has fallen in recent months

Autori Mari Tamm pilt

Mari Tamm

Economist at Eesti Pank



The average interest rate on new housing loans with a mortgage has fallen since the end of last year and in April it reached 5.4%. This was because of the movement in Euribor but also because of the loan margins, which narrowed to an average of 1.5% by April. The margins have been affected very much by the campaigns by the banks to attract new clients.

The average interest rate on new housing loans rose together with Euribor throughout 2023 to reach 5.8% by October, but it had fallen by April this year to 5.4%. A large part of the decline came from Euribor, because the six-month Euribor that is the base rate for the majority of housing loans peaked in October at 4.1% but had fallen to 3.8% by April.

The interest margin that is added on top of the base rate also narrowed. It shrank in the first half of 2023 when Euribor was still rising, and then again at the start of this year. The average interest margin on new housing loans was above 1.8% at the end of 2022 and the start of 2023, but on loans issued this April it was just below 1.5%.

The interest margin narrowed because weak demand and the reduced number of borrowers motivated banks to run various promotional offers. The average margin has been especially driven this year and last by loan products designed for purchases of energy-efficient housing that have an interest margin of zero for a short time at the start of the loan. Without those loans, the average interest margin in April this year would have been around 1.6%. Competition has increased not only for new clients but also for existing ones, which is shown by the notable rise since February this year in the number of renegotiated contracts for housing loans.

Future movements in the interest rates on housing loans will start to be affected more by the Euribor base interest rate, as financial markets estimate that it will continue to fall. As Euribor is likely to bring the interest rates on loans down, the banks will have that much less motivation to reduce their margins further in future.


Data on the average interest margins on housing loans over the six-month Euribor can be found on the Eesti Pank website.

Please note: Eesti Pank published the statistics for banks and leasing companies for April on its website today. The statistical release describes the main changes in the statistics on banks and leasing companies, covering the volume and structure of assets, loans and leases issued, deposits, and interest rates on loans and leases. The statistical release is independent of economic policy releases and is presented separately from them.

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