In May, 23% more housing loans were taken out than a year earlier

Jana Kask

Deputy Head of the Financial Stability Department of Eesti Pank

Activity in the housing loan market has increased noticeably this spring. In May, 65 million euros of housing loans were taken by households, which is the largest amount given out during one month since the end of 2008. This represented a 23% larger turnover in housing loans than a year ago. Although demand for loans has increased together with the rise in activity in the real estate market, the role played by the loan market in housing purchases or in financing construction has been smaller than in the previous growth cycle and lending is now happening on a more conservative basis. The growth in the housing loan stock has been very modest, as new loans exceed repayments by only a small margin. The annual growth rate for the housing loan portfolio at the end of May was 0.1%.

Corporate borrowing remains at the same level as last year. The volume of long-term loans taken in May to finance investment was somewhat larger than in April, but slightly less was taken in short-term loans than a year ago. The largest share of long-term loans went to real estate and construction companies and to financing infrastructure projects.

The total loan and lease portfolio of the banks fell in May to 14.7 billion euros due to the decrease in the loan stock to companies. The annual growth rate slowed to 1.5%.

The average interest rate on housing loans fell to 2.4%. The very low base rates have meant that interest rates are very favourable for borrowers. In recent years, loan interest rates have, to a large extent, been set by the margins added by banks to the base rates, and these margins have now stabilised after rising for around a year. The average interest rate for long-term loans taken by companies in May remained where it was in April at 3.2%.

The share of loans overdue by more than 60 days fell in May to 2.9% of the loan portfolio. Loan quality has continued to improve due to favourable interest rates and a sound economy. Long-term overdue loans declined over the month by more than 30 million euros.

The annual growth in deposits remained at 5%. Deposit growth has been somewhat slower this year. Over the first five months of the year, corporate deposits have declined while household deposits have increased by less than they did last year. The total deposits of Estonian companies and households at the end of May stood at 8.7 billion euros.

Financial sector statistics and their publication schedule can be found on the website of Eesti Pank.

For further information:
Ingrid Mitt
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