Bank of Estonia: Car leasing demand fall suggests cooling in loan market

The Bank of Estonia building in Tallinn
The Bank of Estonia building in Tallinn Source: Siim Lõvi /ERR

The sharp deterioration in the economic environment caused by the emergency situation has had a marked and rapid effect on the car leasing market, the Bank of Estonia says, and reduced demand here was one of the first indicators of a general cooling in the loan market.

The second half of March saw the financing market carried by momentum, but statistics for April onwards, when they are available, are likely to show a fall in loan and leasing issues, the bank says.

Leasing cars is a common way for consumers to get to drive new models.

Companies and households leased around one quarter fewer cars in March than a year earlier, the bank said on its website.

As the restrictions on economic activity were only introduced in the middle of March, it can be assumed that this demand is even lower now.

Loans and leases facts and figures for March

  • €218 million granted on long- term basis in March, roughly average compared with the preceding year.
  • Total corporate loan stock: €9.4 billion.
  • €116 million in housing loans, actually slightly higher than the same month last year.
  • Stock of housing loans: €8.2 billion; other loans and leases: €2 billion.
  • Average interest rate lower, at 2.6 percent for corporate loans, 2.3 percent on home loans.
  • Domestic deposits from non-financial sector rose by 9 percent on year; corporate deposits reached €7.1 billion and household deposits, €8.4 billion.
  • Share of loans to companies in the loan portfolio which were at least ten days overdue rose from 1.3 percent in February to 2.1 percent in March, particularly relating to the real estate and accommodation and catering sectors, the bank said. These sectors have been particularly hard hit by the pandemic and its economic effects.

The capacity of companies and households to service their debts may deteriorate markedly, the bank continued.

The volume of overdue loans to companies in some sectors of the economy increased to the end of March, though there has not yet been any substantial change in the payment behavior of households.

The banks have offered payment holidays to borrowers, which will limit the accumulation of overdue loans in the short term. This means that overdue loans may not give a full picture of the difficulties that there may be in servicing loans.

Having grown rapidly for a long time, the volume of deposits may increase further in the coming months as both companies and households use their savings cautiously, the central bank added.

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Editor: Andrew Whyte

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