"3,000 families will be able to receive preferential loans for housing purchases in the regions," the Latvian government approved such a project on October 17.
The application process for loans under the new program will open at the end of October. Loans will be issued through the state financial institution Altum.
The initial available funding will amount to nearly 26 million euros. At the time of receiving the loan, the borrower must be at least 18 years old and no older than 65 years.
Regions are not of interest to banks
Currently, the majority of mortgage loans – about 80% – are issued in Riga and its surroundings, while the situation in the regions is significantly worse. However, as noted by the Ministry of Economics, which developed the aforementioned Cabinet regulations (Resolution No. 609 "Regulations on Housing Loans in the Regions"), there is demand for housing in the regions, but commercial banks are not always interested in financing real estate outside the Riga region.
Moreover, the level of economic activity does not affect the mortgage situation. For example, in Valmiera, Liepaja, and Smiltene, where there is a relatively high income level and low unemployment rate, the volume of mortgage loans issued is very low. A similar situation exists in other economically developed municipalities.
The Ministry of Economics explains the situation as follows: in the regions, the low property prices make mortgage loans unprofitable for lenders. Instead, alternative types of loans for purchasing housing are available there, with shorter repayment periods and 2-3 times higher interest rates.
"New factories are opening in the regions, more jobs are appearing, but people cannot take out loans to purchase housing. Already 30 km from Riga, the opportunities for bank lending sharply decrease. Acquiring housing, say, in the Kraslava or Jelgava regions is extremely difficult," laments Minister of Economics Viktor Valainis.
Again the worst in the Eurozone
The Ministry of Economics also notes that for several years now, the activity of mortgage lending in Latvia as a whole has been one of the lowest in the Eurozone. By the end of 2023, the total amount of mortgage loans accounted for only 12% of Latvia's GDP, which is 3 times less than the Eurozone average of 36%.
It is evident that these figures are partly related to the rise in Euribor rates, which peaked in mid-October 2023 at over 4.1%. Naturally, less affluent Latvians reacted to this. However, Euribor has risen across the entire Eurozone. Thus, the reluctance to invest in one’s own housing in Latvia has other reasons.
Who can apply for a preferential loan
According to the Cabinet regulations in the new mortgage program, an individual can obtain a loan for housing purchase if:
– you are currently at least 18 years old and will not be older than 65 years at the time of final loan repayment;
– you are a citizen of Latvia, a non-citizen of Latvia, a citizen of an EU member state, a state of the European Economic Area, or the Swiss Confederation, or a person who has been granted stateless status in Latvia;
– you will meet the repayment options that comply with Altum's developed credit policy and other financing conditions;
– the loan amount will be up to 100 minimum monthly salaries, or 74,000 euros, and the term will be up to 30 years.
