Although the pandemic and the accompanying uncertainty have led many to postpone the idea of buying property, transactions are still happening. Swedbank’s data show that the number of applications for credit holidays has decreased significantly in the last two weeks, while the number of people who want to find out about their opportunities to borrow for housing has increased, reaching the level of applications at the beginning of this year before the pandemic was announced.
This does not mean that the population is in a hurry to buy a new home, but there is cautious optimism, the credit institution points out.
Normunds Dūcis, Head of Mortgage Lending in Swedbank in Latvia, informs that Swedbank is currently continuing to lend to both individuals and companies. “Currently, people who are stable about their job and income and want to complete the pre-crisis property acquisition process or get advice on their borrowing opportunities are turning to finance. They are mostly IT, financial and public sector employees,” he says. .
“For the people most directly affected by the COVID-19 crisis, we now recommend a much more critical assessment of the stability of their incomes and the need for additional financial commitments. These are people working in tourism, catering, transport, entertainment, beauty and culture. Even if people have a pre-determined provision for the first installment and an airbag to cover the first installment of the loan, it must be remembered that a mortgage is a long-term commitment and it is in the interest of both individuals and the financial institution to make the commitment successful. Therefore, at present, when evaluating the client ‘s situation, we recommend waiting until it is clearer what the consequences of this pandemic will be on the economy and the budget of the particular family in the long run. At present, we recommend following the principle – measure seven times before cutting,
When evaluating people’s opportunities to borrow, the family’s regular monthly income and expenses are primarily assessed. This makes it possible to understand how the loan will affect the family’s financial balance, or whether another regular payment will rather become a burden on the family. “Of course, the context of the overall economy is always important – which sectors of the economy are expected to grow, ie labor needs and vice versa. This is exactly the aspect we are paying special attention to now, as the crisis has affected many companies in various sectors. individually, analyzing several factors, so the decision to grant a loan may differ even with the same income of potential borrowers, “emphasizes the bank ‘s representative.
A little more than a month after the introduction of the state of emergency in Latvia, the specialists of the credit institution have not noticed a significant drop in real estate prices.
“Currently, the demand for housing has fallen, but it should be noted that the number of offers in the market has also decreased significantly. Both buyers and sellers are currently waiting, which keeps property prices stable. In some cases, it is possible to get a discount from the seller. The practice also existed before the emergency situation.
Speaking about the expected impact on the construction costs of private houses, he says: “It has been too short to talk correctly about changes in construction volume and costs. At present, customers continue to negotiate with the bank’s construction expert, adjusting existing construction cost estimates or preparing What we have observed in controlling the use of costs in the construction process – customers are much easier to fit into the initially planned budget, due to the freer availability of labor in the market and the customer has more time to monitor prices for materials, machinery and labor , as well as are happy to do the work themselves.
Sometimes there are problems with the supply of specific materials due to the complex logistics between countries due to partly closed borders and the rescheduling of transport during this time. In general, caution and anticipatory behavior are felt among customers. Those who perceive the pandemic more easily and who have larger stocks or have already started the construction or design process feel freer and safer. “
N. Dūcis also reminds that loan interest rates consist of a fixed and a variable part.
If the fixed part is determined at the time of concluding the contract and is valid for the entire term of the contract, then the variable part consists of short-term interest rates or EURIBOR. As the EURIBOR rate rises, so will the monthly payment and vice versa.
“Currently, EURIBOR rates are negative, and although the recent rate hike is significant, the rate remains negative, which does not currently affect the loan payment. Borrowers should note that if the EURIBOR rate becomes positive, monthly payments will increase, but we have not faced this situation before. It should be remembered that the EURIBOR rate is reviewed periodically – most often every six months, but this term may vary depending on the terms of the credit agreement, “explains N. Dūcis.
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