The rise in real estate prices has increased the size of the average housing loan

Autori Gaili Grüning pilt

Gaili Grüning

Economist at Eesti Pank



Demand from households for housing loans remains large. There were 168 million euros of housing loans issued in April, and the housing loan portfolio of the banks was 10% larger than a year earlier. The Russian invasion of Ukraine at first made households in Estonia cautious about borrowing, but demand for loans recovered quite quickly. Less was issued in housing loans in April than in the autumn, but more than was issued last spring. The housing market remains active, and prices continue to rise. The average housing loan issued in April was 12% larger in size than the average a year earlier, reflecting the rise in prices in the real estate market. Demand has been maintained by the savings that households have built up and by strong growth in incomes.

The amount taken by households in car leases in April was the same as a year earlier at around 32 million euros. The number of lease contracts has fallen a little, and was lower than it was in the spring before the pandemic. Earlier, leases were signed in equal amounts for new and used cars, but in the past two years, around two thirds of the contracts signed with private individuals have been for used cars. The limited supply of new cars is raising their prices and increasing the size of the average lease for them.

A total of around 200 million euros in consumption loans was taken from banks and other creditors in the first quarter of the year, which was 25 million euros more than a year earlier.  Loans issued by banks for consumption totalled 87 million euros in April, which was about the same as a year earlier. This indicates that the general decline in confidence and the rise in prices have not yet particularly reduced the demand for consumer credit.

The price of bank loans has become lower and lower for households. The average interest rate on new housing loans with a mortgage in April held at its record low level of 1.9% from March. A year earlier it was 2.0%. The average interest rate on car leases signed with households was 2.4%, having been 2.5% a year previously. The lower interest rate means that the loan servicing costs of households are smaller. However, the current average interest rate consists mainly of the interest margin of the banks, and it should be remembered that interest rates may rise in future.