Interest rate rises are driven by the Euro Interbank Offered Rate (Euribor), which has been climbing, and economic and general uncertainty have also played a role in decisions to postpone purchases.

Spokespersons for some of Estonia's largest banks told ERR that the trend had already started in September, and gathered pace since then.

Home loans area manager at Swedbank, Anne Pärgma, put the fall in applications at 50 percent between the start of the year and the end, though: "In terms of contracts, the decline is much smaller, and is close to 15 percent," she added.

Pärgma added this disparity was the result of people in the past applying for loans ahead of finding a desired property or even starting the search, while currently those applying have already found a potential home and have already spoken to the bank ahead of finalizing their plans.

Catlin Vatsel, head of private financing at Estonian-founded and owned bank LHV, put the drop in home loan applications at 25 percent for the period September to November 2022, compared with the same period in 2021.

Between the first half of the year and the second half, however, the fall was 45 percent, she added.

Inflation and rising energy costs during heating season have played a role here, Vatsel added. "Due to the increase in costs this winter, customers will be able to obtain credit than before summer, since we have to grant loans responsibly and take into account the increase in costs, to enable customers to repay their loan."

"In this connection, it is more and more the case that customers will not get as large a loan sum as they had wanted," she added, stressing that this was in the customers' own interest.

Luminor has also had to revise its maximum loan values downwards, as a result of the rising cost of living.

The company's head of private banking, Tanel Rebane, told ERR that people are either having to make a larger deposit or to choose a cheaper purchase since, while costs have risen, there has not been an equivalent fall in house prices.

"At the same time, the average home loan issued by Luminor in the last two months remains high - €150,000," he added.

Swedbank's Anne Pärgma said that the apparent exercising of ccommon sense on the part of the public was a positive thing.

"We can see a lot of common sense being exercises today. People are considering things carefully, which is very good," she said.

There has not been any need to decline more applicants than before, Tanel Rebane added – people are generally assessing their own options themselves, helped along by the bank's advice.

Anne Pärgma at Swedbank added that rejections given by her bank may often represent a postponement while customers amass a larger deposit or while the type of income relied upon is examined further, rather than an outright declining of a loan.

The latter cases tend only to happen if the individual has a poor credit record, ERR reports, and in most other cases banks will seek a way of finding a loan which is affordable for customer and bank alike.

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