The volume of housing loans issued in December was the largest of recent years

Autori Gaili Grüning pilt

Gaili Grüning

Economist at Eesti Pank



A little over 218 million euros of housing loans were issued in December 2021, and the housing loan portfolio of the banks was 9.3% larger than in the previous December. This was the fastest growth of the past decade. Like it was in autumn, the number of loans issued was high in December. The average amount borrowed was again larger in December than it was in the preceding months, reflecting the rise in prices in the real estate market. It should be noted though that as the debt of households increases, so does their vulnerability to loan servicing costs.

Although the volume of new loans issued was exceptionally large in December, this amount also covers loans issued for which contracts had been signed earlier. The total amount of the new loan contracts signed was smaller in December than in earlier months, as had been the case in previous years. Looking forwards, borrowing by households may be reduced by the general rise in inflation from the autumn, and the return of uncertainty in the economic environment.

The average interest rate on housing loans fell to record low levels at the end of the year. The average interest rate on new housing loans with a mortgage was 1.96% in December, having been 2.2% a year previously. The lower interest rate means that the loan repayments of households are smaller. However, the current average interest rate consists mainly of the risk margin of the banks, and it should be remembered that interest rates may rise in future.