Real Estate Expert: From Next Month, Relaxed Rules Will Make It Easier for People to Get Home Loans
According to Igor Habal, a board member of Estonia's largest real estate office, new requirements from Eesti Pank will take effect in April, determining how commercial banks must calculate the maximum borrowing capacity of new applicants, which for many means the opportunity to obtain more home loans than before.
According to Igor Habal, commercial banks operating in Estonia have minimum requirements for issuing home loans to ensure people don't take excessive risks. "Until now, banks in Estonia had to take into account, when assessing maximum borrowing capacity, that a person would be able to pay without problems either the interest rate specified in the loan agreement plus 2 percentage points or a six percent annual interest rate, whichever is higher," said Habal.
"Starting April 1st, the two percentage point addition will disappear and the calculation must be made either with the loan agreement interest rate or a maximum of six percent interest rate. The requirement will still remain in effect that the borrower's monthly loan and leasing payments can total up to 50% of net income. Essentially, this change means that the existing rules will become more lenient and many people will have the opportunity to obtain more credit," said Habal.
"There are several positive news stories for both borrowers and the entire real estate sector this year – firstly, we can expect a gradual decline in euribor. If euribor were to decrease from the current 3.9 to three percent, it could mean savings of approximately 100 euros per month for borrowers and would increase market liquidity," said Habal.
According to Uus Maa's board member, commercial banks have already lowered their interest rates themselves – whereas a year ago they ranged between 1.8–2.2 percent on average, now 1.6% – 1.7% is typical and even more favorable offers are being made for very energy-efficient homes. Together with average wage growth and more favorable interest rates, the real estate market should begin to gradually thaw this year," predicted Habal.
"Currently, there are 20-30% fewer transactions per month compared to the peak, and since the economy is inertial and changes reach real life with a delay, there won't be a rapid increase in activity immediately, but the conditions for it exist. In the economy, with major changes, a typical 12-month lag is normal, during which the market reacts, but the first signs of improvement should reach everyday life by summer. At least until then, the forces and opportunities are in the buyers' favor," added Habal.
