Although in 2021 the number of loans issued returned to the level before the epidemic, the number of such loans issued last year fell by about 7% , according to data compiled by the Credit Information Bureau.
However, the average loan amount is still high despite the decrease in the number of loans issued.
“The constant growth of the given amount in the last seven years, shows that house prices in Latvia continue to rise and are slowly approaching the average in the EU. 2016 the average mortgage loan was about EUR 48 000, in 2021 it was EUR 76 000, and last year it was EUR 80 000. This is an increase of about 67% in the last seven years eat,” as Credit concludes. Intars Miķelsons member of the Information Office.
Active borrowers are residents between the ages of 31 and 40.
They sign 45% of mortgage contracts. There are also 26 to 30-year-old residents, comprising 25% who have contracted home loans.
As the number of loans increases, so does the loan repayment period. 10-year loans have gradually decreased in popularity. Loan contracts for 25 years have completed half of all contracts signed.
“Because there are more and more projects with high demand on the market, residents are choosing higher mortgage options. The increase in housing prices is greater than the increase in payment, forcing the resident to choose the repayment period,” said Miķelsons.
Statistics also show that borrowers are gradually becoming more resilient when it comes to repaying loans. Currently the number of missed payments higher than EUR 150 for more than 60 days is about 0.5%, it was 1-2% in 2016 and 2017.
The expert reminded that during the last seven years the number of credit institutions that provide mortgage loans has decreased. Some banks merged, liquidated or decided to refocus on other products. Luminor and Nordea banks have merged, ABLV Bank and PNB Bank have been liquidated during this period. At the end of 2022 PrivatBank announced the closure of operations. On the one hand this helps to reduce competition, but on the other hand, because the Latvian market is small, there is market consolidation, but only the most secure investors in the game.
Citadele Bank has compiled information about loans granted to build houses. The increase in the cost of construction materials and services last year is the main reason for the increase in the number of construction loans.
Most of the time the lenders planned to build houses in Mārupe, Ķekava, and Đaži last year.
Among the regions outside Pieriga, the construction of houses was the most financed in Bauska, Liepāja and Valmiera. Due to the increase in prices the number of loan requests has increased to EUR 150 000. In 40% of loan requests the amount requested was exceeded. In 2021, the number of requests for loans greater than EUR 150 000 received 30% of all requests, according to the bank’s data.
The number of applications for home construction loans has not changed and remains at the same level as last year.
“Most customers want individual developments and different products. However, at the same time there is an increase in interest for industrial buildings, wooden buildings. These projects help to reduce or completely eliminate the risk of rising costs of building materials during construction. They are growing to supply this segment of the market thanks to the new construction companies that presented their products on the Scandinavian market in the past that entered our country, “said the manager of Citadele Bank’s Private Finance Office, Jānis Mūrnieks.
Home construction loans are usually taken out by people aged 35 to 45 – this group comprises about 40% of all home construction loans made in Latvia.
Most of the time the decision to build a house is chosen by people who have one or two children – such families account for about 62% of the application for building loans.