Demand for loans remained strong in October
Economist at Eesti Pank
- Growth accelerated further in the housing loan portfolio
- Demand from companies for loans remained at the same level as in previous months
- Deposits were up 11% over the year in October
The growth in the housing loan portfolio accelerated further in October to 6.7% over the year. Demand from households for loans has been kept strong by growth in incomes and a high level of confidence. The housing market remains active and prices continue to rise. Some 112 million euros of new housing loans were issued, which was 18% more than at the same time a year earlier. The number of new loans has held steady in recent months, and the average value of contracts has remained the same. New car lease contracts continue to be signed in the same large numbers as before, and the portfolio is 15% larger than it was a year ago.
Demand from companies for loans was at about the same level as in previous months. New long-term loans worth 229 million euros were granted, and a large share of almost 40% of the new long-term loans went to companies in real estate and construction, while a little over 10% went to companies in retail and industry. The yearly growth in the portfolio of loans taken by Estonian companies from banks operating in Estonia has slowed since August however, as one bank moved a part of its loans into the portfolio of its foreign parent bank. Without this, the yearly growth in the portfolio of loans and leases to companies would have averaged 6% in the past three months.
The average interest rate on loans has been generally stable in recent months. The interest rate on new long-term corporate loans has averaged 2.4% in the past two years, and the average loan interest rate has remained a little below this in recent months. The average interest rate on new housing loans rose a little in the first half of the year, and in recent months it has remained at its previous level. In October it was also at 2.4%.
The deposits of companies and households grew rapidly in October as they had done in previous months, growing over the year by 11%. The growth in household deposits is driven by the rapid rise in incomes. Household deposits were up 9% in October at 6.6 billion euros, and growth in those deposits has accelerated in recent months. Corporate deposits have grown more slowly of late, but have still done so very rapidly, by 12% over the year. Faster growth in the economy and increased sales revenues have supported an increase in liquid assets, but at the same time corporate investment in fixed assets has also increased and this may restrain the growth in corporate liquid assets.
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