Annual growth in housing loans remained at 1.6 pct in May

The total volume of loans and leases to Estonian companies and households was 2.4% larger in May than a year earlier.The loan and lease portfolio of the banks increased by 75 million euros over the month and stood at 15 billion euros at the end of the month.

The annual growth in the corporate loan and leasing portfolio rose to 3.6% in May. As in April, loan growth was fastest in agriculture and manufacturing. Although lending to real estate companies increased in May, repayments meant that their total loan and lease stock remained at its average of the past six months.

Annual growth in the housing loan portfolio remained at 1.6% last month. Growth in new loans slowed in May and 3% less was taken in new housing loans than in May last year. The stabilisation of the new lending volume indicates that the rapid growth seen in the real estate market in recent months has slowed to some extent.

Loan interest rates remained low in May. The average interest rate on long-term corporate loans was 2.8% in May, and that on housing loans was 2.6%. Low base interest rates mean that the rates on loans have been favourable for borrowers for some two years now. The interest margins of the banks have not changed by much during this year either.

The value of loans overdue by more than 60 days fell slightly in May. Such long-term overdue loans made up 1.8% of the loan portfolio at the end of the month. The stock of overdue loans may continue to shrink in the coming months as economic growth picks up, although the improvement in the loan portfolio has already happened to a large extent.

Annual growth in household deposits picked up to 8%. Deposits by households and companies increased during the month by 80 million euros to 9.4 billion euros. Two thirds of the increase came from corporate deposits.

Source: Bank of Estonia

Author: Jana Kask, Deputy Head of the Financial Stability Department of Eesti Pank

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