Central bank: Housing loan market slowly recovering

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

The home loan market is slowly recovering from the effects of the coronavirus pandemic, whose peak was in spring, the Bank of Estonia says. However, companies are borrowing and investing less, due to reduced confidence in the wake of the viral spread.

Lending volumes increased gradually from June onward, with €107-million of housing loans being issued in August this year.

Other loans of €34 million were issued to households in August, around a tenth less than the same period in 2019, the bank says.

Companies received €132 million in loans in August, the lowest level for six years, however. The central bank says that confidence was damaged by the pandemic to the extent that the private sector is still reluctant to invest, which in turn is passed on as uncertainty for the economy as a whole.

Loan breakdown for August 2020

  • Volumes were notably smaller in most sectors in August than pre-crisis, with 17 percent fewer contracts concluded in summer 2020 compared with summer 2019.
  • Construction and real estate, where more than half of all corporate loans were issued for August, saw a lower decline than other sectors.
  • The car leases shrank in August after a rise in July, with companies and households leasing €36-million-worth of cars in August, 25 percent down on the previous month (leasehold agreements either via companies or based on individual salary are a common way for drivers to get newer models from upscale car brands than they otherwise might be able to – ed.).
  • Industrial sector over the summer saw rising confidence in summer, though 46 percent fewer long-term loans taken since April compared with the same time in 2019.
  • Average interest rate for long-term loans taken by companies was 2.9 percent in August, and the rate for housing loans with collateral stood at 2.3 percent; these figures are largely unchanged on the pre-pandemic rates.
  • Corporate and household deposits grew at a slower rate in August compared with the previous month. Corporate deposits grew by €22 million and household deposits by €18 million, July to August.
  • Corporate deposits up 12 percent to a total of €7.7 billion, while household deposits rose by 11 percent to €8.8 billion.

More detailed information and graphics are on the Bank of Estonia website here.


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Editor: Andrew Whyte

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