OREANDA-NEWS. April 23, 2013. Loan demand of private individuals in the Baltic States is on its way to recovery, although the developments of loan portfolios have been very different by countries, as the Baltic Household Outlook, compiled by SEB, shows.

In 2012, the home loan balance in Estonia decreased by 0.6% and in Lithuania by 1%. In Estonia and Lithuania, it could be assumed that from the end of 2013, the currently decreasing loan portfolios start to increase. In Latvia, the home loan portfolio is still quickly decreasing (11% per year), showing that the bottom of the home loan portfolio has not yet been reached.

In Estonia, new home loans are given in volumes that are close to the level of new loans in 2003 and in Lithuania to that of 2004. Both in Estonia and Lithuania, the readiness of families to purchase housing with the help of a loan is increasing, although the lending activity is still very far from the volumes of the years 2005–2007.

Compared to the home loan, Baltic families are significantly more conservative when it comes to taking consumer and other loans. The statistics show that the consumer loans of Lithuanian people are steadily decreasing by 5% per year; the balance of consumer and other loans of Estonian people decreased in the first six months of 2012 by 7% when compared with a period year ago and even more in the second half of last year. Therefore, the increased demand for consumer loans seems currently unlikely.

“In all three countries, there is a clear need for improving the living conditions, although lending is restricted by the families’ rather conservative expectations for the income’s persistence or growth and negative experience with loan commitments from the recession period. In case the insecurity from the European debt crisis does not considerably weaken the Estonians’ demand for loans, the loan demand will grow significantly in 2013. In Lithuania, the upturn of the loan market will be somewhat more modest.

As a result of the crisis, the borrowing capacity of most families is lower than ten years ago and this mostly influences applying for consumer loans. On the one hand, the conditions for small loans are somewhat stricter, on the other hand, there are more potential borrowers who do not think it is right to finance their consumption expenditures with loans. When compared to earlier periods, people know more about interest rates and the amount of costs linked to lending,” commented Triin Messimas, Development Manager of Private Loans at SEB Estonia.

The SEB Baltic Household Outlook is available for review at: www.seb.ee/BHO_aprill_2013