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International Internet Magazine. Baltic States news & analytics Saturday, 21.09.2019, 18:40

Moody's - Baltic states housing market is positive for mortgage collateral, supports covered bond development

BC, Riga, 05.09.2019.Print version
Economic conditions in Estonia, Latvia and Lithuania are helping borrowers meet mortgage repayments, a credit positive for the quality of mortgage collateral. Nonperforming loan rates have fallen as banks have strengthened their underwriting abilities and restricted their risk appetite.

Economic growth and relatively low housing costs in Estonia, Latvia and Lithuania are helping home owners to meet mortgage repayments, a credit positive for the quality of mortgage collateral, Moody’s Investors Service said in a report published today.

 

“Since house prices roughly halved during the financial crisis of 2007 to 2009, they have recovered fully in Estonia, but remain almost 20% below peak in Latvia and Lithuania, and banks have strengthened their underwriting abilities and restricted their risk appetite,” said Greg Davies, VPSenior Research Analyst at Moody’s. “Nonperforming loan rates have reduced and are currently around 2%.”

 

At present, no covered bonds are outstanding in Estonia, Latvia and Lithuania, largely because the Nordic banks that dominate the mortgage sectors in these countries have historically provided cheap funding to their Baltic subsidiaries. However, there is now a focus on covered bonds as a potential wholesale funding source. Estonia passed legislation this year to establish a covered bond market.

 

Mortgage loan features and underwriting standards in the Baltic states are now in line with other European countries. The three countries have also introduced macro-prudential policy measures, which limit mortgage market risk, and mortgage delinquency and nonperforming loan rates are relatively low. The share of mortgage loans that are more than 90 days in arrears is just 0.4% in Estonia and around 2% in Latvia and Lithuania. Subscribers can access the report at:http://www.moodys.com/researchdocumentcontentpage.aspx? docid=PBS_1175401






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