Politicians looking for ways to support borrowers as banks would not consider rate cuts - Reirs

  • 2023-11-14
  • LETA/TBT Staff

RIGA - Latvian politicians are looking for ways to support struggling mortgage borrowers because banks, "blinded by profits",  would not considering cutting their interest rates, Janis Reirs, chairman of the Saeima Budget and Finance (Taxation) Committee, says in an interview published in the daily Latvijas Avize. 

"There are countries like Greece where banks themselves have agreed to lower their loan rates to support borrowers and the economy. But it has not been the case in Latvia, because the banks have been blinded by their profits," the lawmaker said. 

Reirs noted that the government provided significant assistance to the banks in 2010 and 2019, so the banks' current uncooperativeness looks very shortsighted. In 2010, around 180,000 people left Latvia, including many who emigrated because of their mortgage debts. "Of course, one could argue that they should not have taken the loans if they could not pay, but the banks, too, were acting in a highly irresponsible way by distributing the loans to everyone. However, when the crisis struck, the responsibility for the situation lay primarily with the borrowers, and the state was supposed to help the banks, not the people. And what about the banks? They have been generating profits almost all the time, except for a short period," Reirs added.

Reir has promised not to allow this to happen again. "The state will not allow people to find themselves in a situation where instead of simply curbing spending, they have to start cutting expenditure related to raising children," the lawmaker said, "If we do nothing, the population will suffer and a new wave of emigration cannot be ruled out. I don't want that! Maybe we should take courage for once and defend the interests of the population?"

According to the head of the Saeima committee, Latvia's mortgage portfolio is unique in that banks take almost no business risk, as around 60-70 percent of loans are guaranteed by the state, while Latvia has the highest mortgage interest rates in Europe. "Mortgage rates in Latvia are higher than those in the home countries of the big banks, even despite the state guarantees. Does no one think there is something wrong here?" Reir asked rhetorically.

Reirs noted that the banks and politicians have different views, as the politicians want to support a wider range of people, not only those who are already in insolvency.

"We are talking about measures needed to prevent the destruction of Latvia's already thin middle class. (...) To deal with the individual cases of those who are already drowning means that we will not pay attention to all those who have just started to drown and are in a critical situation," the politician said.

"Of course, from the banks' viewpoint, there is no problem, because Latvians will give up their last shirt in order not to remain in debt. But the consequences of doing nothing are unforeseeable for the development of the country. Therefore, action is needed," Reirs said.