Lending in Latvia continued to expand during the first half of 2026, despite rising financial market interest rates and geopolitical uncertainty, according to Matīss Mirošņikovs, an economist at the Bank of Latvia.
He said both household and corporate loan portfolios continued to grow despite the conflict in the Middle East and higher market interest rates. Household deposits also increased as consumers remained cautious, while corporate deposits grew even faster, partly because newly issued loans had not yet been fully invested.
According to Mirošņikovs, household lending at the end of June was 10.6% higher than a year earlier, reaching nearly 7.2 billion euros.
Mortgage lending continued to post strong growth, rising 9.5% year-on-year, while consumer lending expanded even faster.
Despite the six-month EURIBOR increasing from 2.1% in February to 2.6% in June,
banks continued to issue new housing loans at a strong pace.
Between January and June, new mortgages averaged around 120 million euros per month, supported by intense competition between banks that has kept lending margins below the levels seen several years ago.
Corporate lending also maintained robust momentum.
Outstanding loans to non-financial companies increased 14.4% compared with June last year, exceeding 7.2 billion euros.
Growth was recorded across a broad range of industries, including manufacturing, energy and, increasingly, the real estate sector.
Mirošņikovs said this was reflected in stronger growth in long-term lending, while short-term corporate borrowing declined slightly.
New lending activity has remained consistently high since last year.
In June alone, banks issued almost 200 million euros in new corporate loans, bringing total lending during the first six months of 2026 to more than 1 billion euros, broadly matching last year’s level.
Household deposits increased 8% over the year to reach 12.6 billion euros, while deposits held by non-financial companies rose 17.7% to 8.3 billion euros.
According to the economist, the rapid increase reflects two main factors: newly issued loans are not being spent immediately, and a base effect, as corporate deposits were unusually low in June 2025.
“Overall,
deposit growth continues to be supported both by households’ cautious financial behaviour and by higher interest rates,
which have made saving more attractive,” Mirošņikovs said.
He added that fixed-term deposits are currently growing much faster than overnight deposits.
Demand for Latvian Treasury savings bonds has also continued to increase. By May, the outstanding value of savings bonds had reached 436 million euros, 35% higher than a year earlier.
Their popularity has been driven by rising returns, with the interest rate on 12-month savings bonds reaching 2.8% in June, compared with 2.3% offered on bank term deposits. In addition, interest earned on Treasury savings bonds is tax-exempt, making them even more attractive to investors.
Although Latvia’s household and corporate lending portfolios are expanding at one of the fastest rates in the euro area—trailing only Lithuania and Bulgaria in annual growth—the country’s overall level of borrowing remains relatively low.
In the first quarter of 2026, Latvia’s domestic credit portfolio amounted to 31.8% of GDP, compared with the eurozone average of 73%, indicating that there is still considerable room for further lending growth, Mirošņikovs said.
According to the Bank of Latvia, the country’s total domestic loan portfolio stood at 16.67 billion euros at the end of June 2026, while total domestic deposits amounted to 21.862 billion euros.
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