Data shows that only 4% of housing loans in Lithuania are taken out with fixed interest.
“The real possibilities of obtaining a fixed interest rate housing loan in Lithuania are low and a consumer who receives a housing loan offer from a bank or other lender must have at least two alternatives”, says Gediminas Šimkus, director of the Bank of Lithuania.
It is proposed to oblige banks to offer citizens the possibility of choosing a variable interest rate loan or a fixed interest rate loan for at least five years. But the president of the banking association doubts that it helps people save.
“We would like to avoid the situation we had with electricity packages. When electricity prices jumped about six months ago, residents were motivated to switch to fixed packages. Well, legal changes are currently underway to change this situation again,” says Eivilė Čipkutė, President of the Association of Lithuanian Banks.
And the loan holders themselves say that even if they had known that mortgage interest rates would rise so much, they still would not have chosen fixed interest rates.
“We probably wouldn’t, because the housing loan is still contracted not for a few years, but for a decade at least. Looking at the prospect, maybe the interest rates will come down after this situation is past,” says the woman who currently has a home loan.
Bank representatives assure that even now all major banks in the country give their customers the opportunity to choose between fixed and non-fixed interest rates.
“We ourselves encourage customers to also consider several alternatives: choose both variable interest rates and consider fixing for a period of three or five years,” says Edvinas Jurevičius, representative of the Luminor bank.
Not only fixed interest rates are unpopular in Lithuania, but also the refinancing of loans which, according to G. Šimkaus, saves money. The Bank of Lithuania offers to educate the public about this.
“When refinancing a loan in the same bank, the costs of concluding the contract cannot be higher than for new loans. The second thing is that when refinancing a loan, you often need a substantial sum of money, sometimes more than 1,000 euros, to cover the costs of the new contract, the notary fees and the costs of the real estate expertise”, explains G. Šimkus.
The Bank of Lithuania proposes to create an independent loan calculator accessible to the public. However, the President of the Association of Lithuanian Banks criticizes this proposal.
“It would be difficult to create such a calculator that is accurate for the whole market, because the practices of market players are slightly different: payment terms and others”, explains E. Čipkutė.
According to the Bank of Lithuania, these proposals will now be discussed with other institutions and only after that changes to legal acts will be initiated, although, according to G. Šimkaus, residents may see real changes this year.
See the full LNK report here:
Source: The Delfi