Coronavirus sees drop in home loan and car leasing bank applications

Home loans interest is down, though at most banks, interest rates remain unchanged.
Home loans interest is down, though at most banks, interest rates remain unchanged. Source: Siim Lõvi/ERR

Many major banks in Estonia have not changed interest rates on home loans amid the coronavirus pandemic to date, though they are paying more attention to those customers who are seeking homeloans at a time when many planned purchases have been put on hold. One bank, Luminor, says it has cut its interest rates.

"A borrower must be able to repay a loan on a long-term basis. If the borrower is in a situation where avoidable default could happen immediately upon receipt, the borrowing needs to be carefully considered," said Anne Pärgma, Head of Housing Loans at Swedbank. 

"In the current emergency, where the spread and impact of coronavirus have created uncertainty in people's future, there are those customers who want to cancel their current loan deal for understandable reasons," she added, though was unable to put a figure on this category of customer.

Pärgma confirmed that the loan conditions have not tightened, despite the emergency.

"Regardless of the current emergency situation, Swedbank's day-to-day work on loans has not changed. Customers who want to buy a home, and have a long-term income, can apply for a loan, and be sure that it will be reviewed in any case."

"We have not tightened the terms and the average home loan interest rate has remained around 2.3 percent," she said.

The actual loan application has moved to the phone and online, however, rather than face-to-face at a bank office, given the current restrictions, she said.

Scandinavian-owned SEB has also noted greater customer caution and more informed decisions over homeloans in recent weeks.

"This has initially been reflected in a decline in new loan and leasing applications. As loan decisions are made earlier and are valid for a few months, the trend has not yet affected the number of contracts to be signed," said Sille Hallang, head of SEB's private banking.

Hallang also recommends caution.

"We advise today's borrowers to carefully consider whether and how the current situation may affect them and their employer, not only at this time, but in the coming months. We recommend postponing the borrowing decision until the situation becomes clear," Hallang said.

Luminor has cut interest rates

Estonian bank Luminor, on the other hand, says it has reduced its home loan interest rates to attract customers, though the bank would not give a figure.

"We have not directly tightened the terms and conditions, but we have been more vigilant. We have also not raised interest rates," said Heiki Raadik, Luminor's head of credit products, adding that the bank was back on the home loans market after a period of a couple of years' restructuring.

"It is very difficult to say an actual interest rate because it will still depend on the individual customer - for example, their obligations, contribution, past payment behavior and collateral," he said.

Despite this there has also been a decline in homeloan applications with Luminor, Raadik said.

"The biggest reason for the decline in applications is not any loss of income, but concern about the future. In addition, more affordable offers are expected. So some people have just put off their plans for a while."

Car leasing applications have been halved

Lease applications for private vehicles, a popular method of those on a salary to obtain a new car, have also fallen – by half, according to Swedbank.

"The number of car leasing applications has decreased by about a half, plus there has been a slight increase in the number of customers who want to cancel or postpone their deal until the situation returns to normal," commented Karin Saar, Swedbank's head of private leasing.

Luminor also said that interest in car leasing was much lower than it had previously been.

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Editor: Andrew Whyte

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