The housing loan market soared in November compared to the other months of the year

Jana Kask, Head of the Financial Sector Policy Division of Eesti Pank

Corporate borrowing remained subdued in November. Loans and leasing issued to companies totalled 2.2 billion kroons, which is somewhat less than in October. The loan turnover of the trade sector was greater than usual as a result of one major loan transaction. The manufacturing sector was still modest in terms of borrowing. Annual growth in industrial production was over 30 per cent, but the amount of loans and leasing granted to manufacturing companies grew by only 3 per cent from a year ago.

Housing loan turnover reached a record high in the past two years with 665 million kroons. However, the level of new loans is still lower than the repayments of loans issued earlier, and so the loan stock is decreasing. The amount of loans and leasing granted to Estonian companies and households shrank by 825 million kroons, or 0.4 per cent, in November. The total value of the financing portfolio stood at 238 billion kroons, 6.3 per cent less than a year ago.

Low interest rates keep the cost of borrowing low for the borrowers. The average interest rate on housing loans declined to 3.2 per cent in November, with the average interest margin being below 2 per cent for the first time in the past two years. The average interest rate on long-term corporate loans, on the other hand, rose to 5.8 per cent because of the higher margin of a few major transactions.

Loan quality has improved as expected. The amount of loans overdue for more than 60 days contracted by over 250 million kroons in November and constituted 6.8 per cent of the total loan portfolio. Eesti Pank's forecast anticipates the share of overdue loans to stabilise at 5 per cent by the end of 2011, which is still times higher than is common in a stable economic environment.

Annual growth in deposits picked up to around 10 per cent. The total of corporate and household deposits increased by 1.9 billion kroons, or 1.6 per cent, to 115 billion kroons in November. Growth in deposits has been facilitated by precautionary saving and positive economic growth, and also by lower demand for cash because of the looming introduction of the euro in Estonia. The amount of currency in circulation has decreased over 15 per cent from November 2009, and it declined further in December.

Financial sector statistics and its publication calendar are available on the website of Eesti Pank at www.eestipank.info/pub/en/dokumendid/statistika/pangandusstatistika/tabelid/.


Figure 1. Monthly turnover of housing loans and weighted average interest rate


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


Figure 3. Volume of corporate and household deposits and the annual deposit growth rate

For further information:
Ingrid Mitt
Public Relations Office
Telephone: +372 668 0965, +372 512 6843
E-mail:
ingrid.mitt [at] eestipank.ee