Taavi Raudsaar, Economist at Eesti Pank.
Households are borrowing at quite a strong rate to buy houses and cars. The market for housing loans has been quite active despite the weakness in the overall economy, as unemployment has remained moderate while nominal wages have grown. The yearly growth in the stock of housing loans has accelerated gradually since spring, and it reached 7% by the end of September. The car tax that will start to apply in the new year has pushed people to buy new cars before the end of the year, and to use car leases to do so. The amount issued in car leases in the third quarter was 26% more than in the same quarter of last year. This September saw the second highest ever number of car leases issued in a month, behind only September 2021, which was when large amounts of money were withdrawn from second pillar pension funds. The yearly growth in the stock of car leases is more moderate at around 4% though, as the amount taken in new leases in the first half of the year was still quite small. The growth in credit card loans and consumer loans was affected very much by the merger in April of Coop Finants and Coop Pank. Even without that structural change, the yearly growth was quite fast in August at 9% in the portfolio of credit card loans, and 7% for consumer loans.
Demand for corporate loans has become more even across sectors in recent months, and remains generally modest. The stock of loans and leases issued to companies was 3.6% larger at the end of August than it was a year earlier. Companies had little interest in increasing their investments and in borrowing at a time when profits were falling, production capacity was underutilised in a large part of the economy, and interest rates were unusually high. As the situation changes for these factors, some increase in borrowing by companies can be forecast. The clear driver of the growth in borrowing in the past couple of years has been the energy sector, but growth in borrowing there has now stopped. At the same time the contraction of the loan portfolio that lasted two years for manufacturing companies and around three years for logistics companies has now ended. Overall the growth in borrowing across the sectors of the economy has become more even. Real estate and construction has again become the sector with the fastest growth in borrowing.
The rate of growth in borrowing by Estonian companies and households is one of the highest in the euro area. Estonia was still in the top three in August for the speed of growth in lending to both households and businesses. The relatively fast growth in borrowing in Estonia shows that households and businesses have not substantially reduced their investments despite the weakness in the economy, and access to bank loans remains good. Although there is no major problem with access to loans in Estonia, the high cost of borrowed money puts Estonian companies in a more difficult position than their foreign competitors because the interest rates on loans are higher in Estonia.