In 2022 there was a significant increase of Euribor or European interbank market rate, which increased all monthly loan repayment amounts. According to a survey among Latvian residents by Luminor Bank, nearly one-fifth (18%) of Latvian residents admit they feel the influence from growth of Euribor rate.
The growth of Euribor is felt the most acutely by residents of Riga and its surrounding areas. Some residents say their monthly loan repayment amounts have increased. Others have had to postpone housing purchase plans because of the growing rate. The survey was carried out in December 2022 together with Norstat Latvia. 1 008 Latvian residents aged 18 to 74 years were interviewed.
13% of respondents said the monthly housing loan repayment amount has increased for their family. 4% of respondents mentioned the change in loan repayment amounts has affected their housing purchase plans. 1% mentioned the owner of the housing they are renting has increased the rent fee. 16% of respondents said it is difficult for them to assess the effect from the increased rate.
The effect from increased loan repayment amounts is felt the most by residents in the 30 to 39 years age group. This was mentioned by nearly every fourth (23%) respondent. Increased loan repayment amounts have affected residents of Riga and Pieriga the most and residents of Vidzeme and Latgale the least.
«After a seven-year break we have experienced a rapid rise of Euribor rate. While last year the rate was negative, now it is above 2%. This has a clear impact on borrowers because housing loan and car leasing costs are up together with energy resource prices and inflation,» explains Luminor Bank Private Lending Office manager in Baltic States Kaspars Lukačovs.
Data indicates that the biggest impact is felt by economically active residents older than 30 years. People in this age group are also the most active borrowers. The increase had the biggest impact on the areas surrounding Riga, where most real estate deals normally take place.
At the same time, despite high inflation and growing interest rates, clients do not have problems with loan repayment.
«Currently there are no trends indicating any difficulties residents may have with repaying loans,» explains the expert.
To stabilise Europe’s economy and reduce inflation, the European Central Bank increased Euribor rates multiple times in 2022. The last increase took place on the 15th of December. Currently the three-month Euribor rate is 2.081%, six-month rate is at 2.519%, and the twelve-month rate is at 2.871%.
According to the bank’s expert, ECB will continue battling inflation. This means Euribor rate will increase next year as well, but not as quickly as it did this year.
Also read: European Central Bank increases interest rate to 2.5%