While in 2021 the number of issued mortgage loans had returned to the pre-pandemic level, the number of such loans issued last year went down by approximately 7%, according to data compiled by the Credit Information Bureau.
Nevertheless, the average size of loans is up despite the drop in the numbers of issued mortgage loans.
«The constant growth of the average issued amount over the last seven years at least indicates that housing prices in Latvia continue going up and are slowly nearing the average in the EU. While in 2016 the average mortgage loan amount was approximately EUR 48 000, in 2021 it was EUR 76 000, and last year it was EUR 80 000. This is an increase of approximately 67% over the past seven years,» as concluded by Credit Information Bureau board member Intars Miķelsons.
The most active loan takers are residents aged 31 to 40 years.
They sign 45% of mortgage loan contracts. There are also residents 26 to 30 years old, who make up 25% of housing loan contract takers.
With loan amounts on a rise, the loan repayment terms are on a rise as well. 10-year loans are gradually becoming less and less popular. Loan contracts for 25 years already make up half of all signed contracts.
«Because more and more projects with high energy efficiency are in demand on the market, residents pick maximum term mortgage loan options. The housing price growth also exceeds wage growth, forcing resident to pick longer repayment terms,» explains Miķelsons.
Data also indicates that loan takers are gradually becoming more responsible when it comes to loan repayment. While at the moment the number of missed payments higher than EUR 150 for more than 60 days is approximately 0.5%, it was 1-2% in 2016 and 2017.
The expert reminds that over the course of the past seven years the number of credit institutions that issue mortgage loans has gone down. Certain banks were merged, liquidated or decided to refocus on other products. Luminor and Nordea bank have merged, ABLV Bank and PNB Bank have been liquidated over the course of this period of time. At the end of 2022 PrivatBank announced closure of operations. On the one hand this helps reduce competition, but on the other hand, because Latvia’s market is relatively small, there has been market consolidation, leaving only the safest lenders in the game.
Citadele Bank has compiled information about loans issued to build housing. The rise in prices of construction materials and services last year was the main reason behind the growth of housing construction loan amounts.
Most often loan takers planned construction of houses in Mārupe, Ķekava, and Ādaži last year.
Among regions outside Pieriga, housing construction was funded the most in Bauska, Liepāja and Valmiera. Due to increased costs the average loan request amount has increased to EUR 150 000. In 40% of loan requests the requested amount was even larger. In 2021 the number of loan requests for amounts larger than EUR 150 000 accounted for 30% of all requests, according to the bank’s data.
The overall number of loan requests for the construction housing has not changed and remains on last year’s level.
«Most clients prefer individually developed projects and different suppliers. However, at the same time there is an increase in the interest for industrially-made, wooden houses. These projects help reduce or completely exclude the risk of construction material price rise during construction. Supply in this segment of the market is also on a rise thanks to new construction companies that had previously provided their products on the Scandinavian market in the past entering our country,» says Citadele Bank Private Financing Office manager Jānis Mūrnieks.
Housing construction loans are most often picked by residents aged 35 to 45 years – this group composes approximately 40% of all housing construction loans taken in Latvia.
Most often housing construction option is picked by residents with one or two children – such families form approximately 62% of all housing construction loan requests.
Also read: Housing affordability down considerably in Latvia; buyers remain reluctant