Housing finance market activity remained sluggish in April

Siret Vildo, Financial Sector Policy Division of Eesti Pank, Specialist in Charge

In April, the corporate and household loan and leasing stock declined by 1.5 billion kroons, i.e., 0.6%. The loan and leasing stock stood at 246 billion kroons at the end of the month, being 6.6% down on the same period a year ago. The corporate loan and leasing stock contracted by 8.7% over the past year. At the same time, caused by the large share of housing loans with long maturities, the household loan and leasing stock fell by 4.1%.

Like in previous months, borrowing remained subdued in April as well. The stock of loans issued to enterprises within the month amounted to 2 billion kroons. Nearly half of the new loans went to the trading and industrial sector. Although the confidence of households has improved over the past half a year, demand for housing loans remained very modest, irrespective of the relatively low price level of real estate. The stock of new housing loans issued within the month was 13% smaller than the average level of 2009.

The stock of overdue loans did not change much compared to previous months. The stock of loans overdue by more than 60 days decreased by 165 million kroons, but their share in the portfolio remained at the level of 6.7%, like in March. The quality of loans issued to the corporate sector improved in April, but the share of housing loans overdue by more than 60 days increased by 1 percentage point, reaching 4.6%. Improvement in the quality of the loan portfolio is a time-consuming process, which will take years even if economic activity picks up.

Similar to other banking-sector indicators, interest rates on new long-term loans remained also at a level comparable to earlier months. The average interest rate was 3.3% on new corporate loans and 3.6% on new housing loans.

The volume of corporate and household deposits increased by 545 million kroons (i.e., 0.5%) in April , amounting to 112.2 billion kroons. Corporate deposits have increased the most in 2010. At end-April, the stock of corporate deposits was 10% larger year-on-year.

Figure 1. Monthly growth of household and corporate loans and leases in Estonia

Figure 2. Share of loans overdue by more than 60 days in the portfolio

Figure 3. The weighted average interest rate on housing loans and long-term corporate loans issued within a month and 6-month EURIBOR

The financial sector statistics and publication calendar are available on the web site of Eesti Pank at www.bankofestonia.info/pub/en/dokumendid/statistika/pangandusstatistika/tabelid/.

For further information:
Viljar Rääsk
Public Relations Office
Telephone: +372 668 0745, +372 527 5055
viljar.raask [at] eestipank.ee