Support for borrowers is necessary, said Bank of Latvia governor Mārtiņš Kazāks in an interview to LTV programme Rīta panorāma.
He also told the programme that the central bank generally supports the suggestion from the Ministry of Finance regarding the adoption of a permanent tax on bank profits.
Kazāks said every long-term planning business has to view the existing situation socially responsibly. The same was outlined in consultations with banks. However, they have yet to show any enthusiasm in accommodating their clients. “We have explained to banks very clearly that the existing regulations allows them to accommodate the needs of their clients and implement this social responsibility. Unfortunately, what we’ve seen from the banks so far is that they are unwilling and slow in this regard – this and that has been done, but there is still a lot left to do,” he said.
At the same time, the governor of the Bank of Latvia also said borrowers need support, but it needs to be focused, balanced and within a specific period of time. In this case it should be financed using banks’ profits and immediately available.
At the same time, Kazāks said that by making specific decisions, officials should avoid causing international investment disputes.
“All of it is doable,” stressed Kazāks, adding that he has no doubts it will be done.
As for the ministry’s proposal to include mortgage loan payments to the list of personal income tax justified expenses for a time, Kazāks said it is one of the ways to help borrowers. However, it is also important to assess whether it is possible to implement this administratively. “If a person has to wait for support for a whole year and only after submitting an income declaration – it’s already too late,” says Kazāks.
As previously reported, in order to provide focused support to Latvian households whose mortgage loans have increased significantly, one of the possible solution is the inclusion of interest rates to the list of PIT justified expenses for the period between 2023-2024.
According to the Ministry of Finance, mortgage interest payments made for housing of up to EUR 2 000 per year could be included in addition to the amount of justified expenses already in force – EUR 600.
The ministry also suggests creating Altus-associated support programme to help capitalise a portion of loan interest payments by attracting additional guarantees from Altum to thereby reduce monthly payments.
The Ministry of Finance also suggests providing focused support as part of available social aid activities.
Also read: Mortgage interest payments may be included in “justified expenses”