Expert: Home Loan Interest Rates Are Falling

If the decline in euribor is still waiting to happen, then several commercial banks have started to encourage home loan uptake with lower interest margins, said Martin Vahter, head of 1Partner Real Estate.

According to Vahter, the new standard, depending on the bank, is an interest margin of 1.65-1.8%. "At the same time, we're hearing from almost all banks that they're offering clients even better personalized offers. If in the second half of last year such a very good interest margin was 1.5%, then today with certain additional conditions it has fallen even to 1.35%. However, in this case one should not expect that bank margins would fall below 1%, as was the case in 2006-2007," Vahter commented, noting that it's definitely worth shopping around and comparing offers from different banks. "In reality, when it comes to home loans, clients have a choice between seven credit institutions," added Vahter.

The increase in competition between banks is also evident, according to Vahter, from the fact that refinancing options for home loans taken from other banks are offered quite readily, and banks are willing to cover the costs of transferring a loan contract from one bank to another. "Real estate market activity has been low for quite some time, largely due to high interest rates, but now it seems that banks are reviewing their role in the real estate market. Low loan activity will in the long perspective reduce banks' revenues, and lowering the interest margin is also beneficial for the banks themselves, as it ensures greater market activity and greater revenue for the bank," said Martin Vahter, head of 1Partner Real Estate.

However, according to Vahter, this is not a development that would quickly drive the real estate market into high activity. "Of course, such bank policy has a positive effect on transaction activity, but we must take into account that euribor remains high and consumer confidence could be greater," said Vahter.