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Lending in Latvia is going up, says finance watchdog

Lending is currently on the rise in Latvia, and there are more loans for housing, said the head of the Finance and Capital Market Commission (FKTK) Santa Purgaile in an interview with Latvian Radio June 8.

In the first quarter of this year, banks' profits were three times as high as the year before. Purgaile said that partly the reason was that, when the crisis caused by Covid-19 began, the banking sector acted very carefully in the area of unsecured credit and created additional stockpiles.

Purgaile pointed out that people began to think very reasonably about housing during the crisis, and some of their savings were used for the first deposit when purchasing housing. This is why the housing market has become active in the first half of the year.

“The housing lending market has been really very active over the last half-year,” Purgaile said. “Greater demand is for detached family homes. The Covid-19 pandemic has contributed to this, and people have realized the importance of having their own private space."

Both demand and the supply of banks in mortgage lending and business lending have increased.

The housing lending market is certainly not in danger of overheating right now. “Everything is measurable in a very balanced growth. If we look at the overall [lending] portfolio against gross domestic product, we're still pretty much lagging in that negative zone as it would be in a healthy economic development scenario.”

The final impact of the Covid-19 crisis cannot yet be fully assessed because there were different State aid instruments, the banks also agreed on different incentives, and these relief periods are gradually ending. As a result, some customers may have difficulty repaying their loans. The credit portfolio deteriorated slightly in consumer lending.

It is worse in the catering, tourism and accommodation sectors, but there are some companies that are even better off than they were before the crisis, the head of the FKTK said.

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