The size of the refinancing loan of the Latvian branch of “Bigbank” increased 2.6 times last year compared to 2021, Edgars Surgofts, head of the Latvian branch of “Bigbank” told LETA.
He pointed out that in 2022, two trends played an important role in the Latvian economy – high inflation and the gradual increase of the EURIBOR rate intended to reduce it.
Surgofts noted that due to the increase in heating and electricity costs due to expensive energy resources, as well as the increase in monthly payments of existing loans, in the fourth quarter of last year, residents had to think more about their spending and look for ways to save. This, in turn, affects consumer optimism and discourages the implementation of larger projects in the foreseeable future. Part of the population temporarily freezes plans to buy a new home, car or make some other larger purchase for which they had planned to get a bank loan. However, more money is spent on home repairs and insulation.
He mentioned that households that took out loans before the events of 2022 are increasingly interested in refinancing loans in order to reduce the monthly payment. “People combine several loans into one or simply refinance a loan at another bank in order to get a more favorable interest rate,” said Surgofts, adding that the size of the refinancing loan of the Latvian branch of “Bigbank” increased 2.6 times in 2022 compared to 2021.
If the growth in both mentioned segments could continue in 2023, then the amount of loans issued in other segments could decrease in the coming months, said Surgofts.
“Insecurity is reinforced by forecasts of the upcoming economic recession, which could become the dominant event in the economy in 2023. At least in the first half of the year. It is expected that the population will become more and more cautious and skeptical about spending. On the one hand, it could help reduce inflation, but on the other hand, it will reduce consumption and, therefore, the state’s income from taxes,” said Surgoft.
At the same time, he noted that different scenarios are possible in the second half of the year, which will be influenced by several important events, including the course of the Ukrainian war, energy prices and the success of the European Union in its efforts to combat inflation.
“Bigbank” is an Estonian capital bank that has been operating since 1992. It specializes in issuing consumer loans to individuals in Estonia, Latvia, Lithuania, Finland, Spain and Sweden, and also offers cross-border services in Germany, Austria and the Netherlands. A branch of “Bigbank” operates in Latvia.
