Borrowing by households increased again in August
Economist at Eesti Pank
- The growth in corporate borrowing has slowed a little in recent months
- The number of new borrowers with housing loans has grown faster this year than previously
- The deposits of companies and households were up 12% over the year
The loan and lease portfolio of Estonian companies and households again grew fast in August, though a little more slowly than before. The stock of loans and leases taken by companies and households from banks operating in Estonia stood at 17.7 billion euros at the end of August, which was 5.6% more than a year earlier. The growth in the loan portfolio has been smaller than before because of slower growth in corporate loans and leases, while the growth in loans to households has accelerated.
Growth in the corporate loan and lease portfolio slowed for the fourth consecutive month to 4.3% over the year in August. Corporate borrowing from abroad is also estimated to have grown relatively slowly in the first half of 2016, like it did last year. Corporate investment in real estate increased in the first half of 2017. In addition to using external funds, companies can also fund their investment from the significant financial buffers they built up earlier.
Borrowing by households increased again in August. Demand for loans from households has been supported by the continuing rapid growth in the average income of wage earners and by low interest rates. Activity increased in the real estate market and prices rose further. New housing loans worth 107 million euros were taken in August, which is one tenth more by value than a year earlier, and the housing loan portfolio increased by 6.4% over the year. The volume of new housing loans has increased this year primarily because the number of new borrowers has grown at a faster rate than before, rather than because the size of the average loan has increased. The portfolio of other loans and leases to households was increased by 29 million euros by the addition of the branch of TF Bank AB to the list of credit institutions. Without this, other household loans and leases would have increased by 8.2% in August rather than 10.7%. Demand for car leases remains strong, and in August the portfolio was some 15% larger than a year earlier. The stock of overdrafts and credit card loans was up in July and August by 4% over the year.
The average interest rate on new housing loans has risen this year. Demand for housing loans remains strong, allowing banks to raise their interest margins. The rise in interest rates may equally be due to higher credit risk for the new housing loan clients. Competition is tighter in the corporate loan market and demand weaker, and the average interest rate on new long-term corporate loans was similar in August to the average of the previous year. The average interest rate for new housing loans granted in August was 2.4%, and the average rate for long-term corporate loans was 2.3%.
As loan growth has been faster, so the deposits of companies and households have grown more and more. The deposits of companies and households were almost 12% larger in August than a year earlier at a total of 21.4 billion euros. The sales revenues of companies have risen this year, and this can be seen in the growth of deposits. Corporate deposits were up 15% on a year earlier, and those of households were up around 9%, which was due to the rapid rise in incomes.
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