Balances on loan private individuals’ loans in Estonia have begun to grow at accelerating rates. According to the Bank of Estonia, last August the balance on private individuals’ loans stood at 7.23 billion euros, up 3.5% year on year. Growth in loan balances is being driven by the growing turnover of loans. In the past six months, growth in the annual turnover of loans has been in the quite high range of 13 to 21 per cent.
The situation of rapid growth in loan balances is increasing indebtedness. This, in turn, is creating risk that banks will apply brakes on the issuing of home loans. That, similarly, will slow the rate of transactions completed on the real estate market and cause prices, which have remained stable, to fall. (more…)