Since May – important changes to buying housing

The amount of fixed interest can be for residents if they decide to choose such a loan option, Nijolė Valinskytė, director of financial stability of the Bank of Lithuania, commented.

– What will commercial banks will have to start offering home lenders or holders?

– From the first day of May, lenders, essentially the largest banks, will have to submit at least two home loan options when submitting a home loan offer: primarily with a variable interest rate, which is common in Lithuania and very common, and another option with a fixed interest rate, which would be fixed for at least five years. This does not limit the lenders to submit additional offers, such as a fixed interest rate for a shorter period.

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– Does that offer come into force only for new loans, or are those who have a valid?

– This applies to new loans. However, of course, you can always ask your bank to overdo the contract. The customer may ask on his own initiative whether they could receive a different home loan option. However, in this case, banks are not legally obliged to submit such a proposal in the order provided for in the new order.

– You mentioned that banks would have to offer a period of at least five years. But, for example, Euribor is the longest offered for the year. This is the question then, for what time the fixed interest should be offered?

– As I mentioned, the lender must be legally bound by a fixed interest rate for at least five years. This means that all five years should not change the interest rate set during the initial period. It is not associated with a specific variable index or market interest, but the banks, after evaluating various aspects, determine the fixed interest rate as the average period.

Ž. Photo by Gedvila / ELTA

– If now, when we choose variable interest rates, they consist of two parts: bank margins and changing euribor interest rates, when will it be fixed, is that, in principle, is the bank’s own interest rate itself?

– Yes, this will be one interest rate included both the expected market interest and various administrative costs, risk components and other aspects.

– Commercial banks say fixed interest has disappeared because no one has chosen them before. Although I had the opportunity to choose between variables and fixed interest a decade ago, and the fixed was quite high. What interest do you predict now?

– It should probably be said that it is not clear where the reason is and where the consequence is, why the population did not choose fixed interest. Recently, banks have often not even made such an offer. As far as we did in surveys, we saw that this option was not even proactively offered, so part of the population might not even know about this possibility. The purpose of these changes is to enable residents to see fixed interest offers and should choose from.

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– But in terms of the size you predict, what interest is that Euribor is now falling and probably still falling?

– It would be very difficult to predict because it depends on the policy of central banks, which in turn depends on inflation, economy and other factors. It is possible to rely on market expectations that show that Euribor will fall for some time, but later a certain rise is forecast. However, these expectations do not always come true and may change.

– Where is the economic benefit to the customer because, as mentioned above, the previously fixed interest was higher? Is it better for banks to reduce margins, which are among the largest in the European Union in Lithuania?

– As far as margins are concerned, they are indeed one of the larger euro areas, but have been about 1.5 percent for some time. This is already a sufficiently favorable size based on our economic situation, market size and other factors.

Fixed interest rates can be useful for a particular group of consumers whose loan premium is quite high and has little additional living income. Increased interest rates for such users could lead to a significant increase in the loan installment. Fixed interest is a kind of hedge against fluctuations in extremely high interest rates.