Analytics, Baltic, Financial Services, Real Estate
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Friday, 19.04.2024, 20:34
Moody's - Baltic states housing market is positive for mortgage collateral, supports covered bond development
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