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Monday 24.04.2017 | Name days: Nameda, Visvaldis, Ritvaldis

Latvia’s housing loan segment falls behind the rest of Baltic States

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUDemand for mortgage loans in Baltic States has been rising for the third consecutive year. Estonian residents seem the most active with housing, construction or repair loans. Demand for mortgage loans is also high in Lithuania. In Latvia, however, residents’ activity remains the lowest.

Estonia’s and Lithuania’s mortgage loan portfolio has been growing since 2013. Unfortunately for Latvia, the country’s demand for mortgage loans continues to decline, according to results of the Baltic Household Outlook compiled by SEB Bank.

In 2015, the volume of new mortgage loans had increased by 21% in Lithuania, 15% in Estonia and only 9% in Latvia in comparison with 2014.

«The volume of new loans issued in Latvia last year forms a total of EUR 271 million. This amount remains below the amount returned by residents for previously taken loans. This is why the total loan portfolio of banks continues to decline. The failed attempts to adopt the left keys principle had negatively impacted the development of Latvia’s housing loan sector. It forced banks to change their financing policies. This resulted in a drop in demand for mortgage. However, after the left keys principle was adopted as an optional condition and the government approved the programme to support families with children, demand for mortgage loans began to rise again,» – explains SEB Bank’s social economic expert Edmunds Rudzitis.

According to results of the survey, now is the perfect time for the acquisition of housing property in Latvia and Lithuania, considering the state of income levels and real estate prices. The situation in Estonia less fortunate – prices there have been growing more rapidly than residents’ income in the past five years.

According to results of the survey, the highest level of demand for housing loans is currently noticed among residents aged 25 to 44. The most active lenders are residents aged 25 to 34 – the proportion of this group of residents grew three percentage points in all three Baltic States last year.

An analysis of loan amounts shows that residents in Estonia aged 25 to 34 and residents in Latvian and Lithuania aged 35 to 44 take on the largest loan commitments. Demand for mortgage loans among residents aged 45 is significantly lower.

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