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Wednesday 19.09.2018 | Name days: Verners, Muntis

90% of mortgage loan borrowers lack even one month-salary savings

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Baltic news, News from Latvia, BNN-NEWS.COM, BNN-NEWS.RUMajority (87%) of mortgage loan takers’ savings do not exceed 300 lats, while for 4% they range from 300 – 600 lats, meaning about 90% of borrowers’ savings are not larger than the average monthly salary.

It is a common practice in Nordic countries to accumulate savings at least at the extent of six month-wages and this suggests the situation in Latvia is poor, indicates Jana Strogonova, board member at Nordea Bank.

The bank’s conducted research shows people postpone their plans of housing purchase because they do not feel secure about their income and the uncertainty stems from lack of financial savings.

It is clear residents of Latvia are not used to accrue money, so they should be educated on how to boost their financial stability and security, Strogonova explains.

She adds that 74% of all the bank’s clients do not accumulate savings at all. Mortgage loan borrowers are slightly more conscientious, of which 40%, do not save up money. However, for majority of people accruing financial resources the sums are very small. While 69% make savings irregularly.

Financial stability is ensured by savings of at least three to six months income, but for a large proportion of Latvia’s population it is an unattainable dream. However, creating one’s safety net and saving up can be done with small amounts of money as well, putting aside at least five to ten lats each month, Strogonova suggests.

To promote borrowers’ money saving habits, the bank has started to offer a new service – mortgage loans with savings, Strogonova informs. It will give the borrowers an opportunity to direct the commission fee for taking a loan, or 1% of the loan amount, to the customer’s savings account, provided that during the following year the client adds at least 30 lats to the savings account.

During the four months of 2011, Nordea Bank issued mortgage loans at the extent of 15 million lats to 305 households – an increase of 10%, compared to the exact period in 2010.


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