Interest rates falling

  • 2004-05-20
  • Baltic News Service
TALLINN - Estonia's Nordea and Sampo banks are going to follow Hansapank in lowering interest rates for housing loans, bringing down their minimum rates to 3.1 percent and 3.4 percent respectively.

Nordea's board decided to lower the risk margin of housing loans issued in kroons, or Euribor base interest, to 0.9 percent, making it possible to issue new loans with an interest of 3.1 percent to 3.35 percent a year, the bank explained.
Families with an income of more than 10,000 kroons (647 euros) per month can obtain the 3.1 percent - 3.35 percent housing loan from Nordea on condition the house or apartment they are acquiring was completed in 2001 or later.
Sampo's rates, on the other hand, will not depend on the house's age.
"As of [May 13] the loan interest in Sampo Bank will start from 3.4 percent, and the interest rate will not depend on the age of the property serving as the collateral," the bank's press officer said.
Previously Sampo's lowest interest rate was 3.5 percent, and it only applied in case of the purchase of a new apartment or house.
The lowest interest rate on housing loans offered by Uhispank, Estonia's second largest bank, is presently 3.5 percent, but the bank said it was prepared to correct the rate in accordance with the market.
"Hansapank has so far had the highest interest margins on the market, and it was a natural course of things on their part to bring their interest rates down to those being offered on the market," Eerika Vaikmae-Koit, the deputy director of Uhispank's retail banking division, said.
Hansapank began providing housing loans starting with 3.4 percent interest as of May 12. Hansapank's lowest - 3.4 percent interest rate - applies to loans where the share of self-financing is at least 25 percent, the property serving as collateral is not older than five years and the client has enough payment power to serve the loan.
In the future, further rate drops were not being ruled out by analysts.
Toivo Annus, retail banking director of Nordea, said the current downward adjustment of interest rates could continue through the year.
"Considering that there are already about 80,000 clients with the housing loan obligation, it seems there aren't many new clients wishing to take a loan," Annus said. "As a result, existing clients will start looking for better conditions for their existing loans, and an interest rate adjustment, triggered by banks wanting to win or keep their market share, will naturally follow."
What's more, compared with neighboring markets, there was still room for rates to fall, Annus said.
"The Nordea Bank housing loan margins in the Nordic countries are 0.7 percent and sometimes as low as 0.6 percent, and I can see nothing to prevent them from being similar in Estonia after some time," he said.