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Interest increasing once again in lending

Lower interest rates mean that interest in lending is growing once again, the board chairman of the Signet Bank, Roberts Idelsons, told the LETA News Agency in an interview.

“A year ago there was lots of uncertainty about the future of interest rates and whether they would rise even more,” says Idelsons. “Right now the question is more of where the interest rates will stop, and that means that overall interest in lending has increased, and that is also true in the corporate segment.”

The bank representative added that borrowing is becoming cheaper, which is good for the real estate market. Mortgages are also getting cheaper, and people are realising that rates are going down, not up. This means secure knowledge that they won’t have to pay twice as much in interested. Construction costs have also stabilised.

“The fact that rates are going down is definitely having a positive effect,” says the head of the Signet Bank. “The effect may not be huge, and it may not be felt immediately, but it will definitely have an impact. I think that the Bank of Latvia as the regulator has also had a positive effect on lending and the capital market in recent years. It has become a partner for the banks, applying a risk-based approach and helping banks and capital market participants in applying regulations more effectively so that the system develops in a sustainable way. This is clearly a positive contribution.”

At the same time, however, the expert also pointed out that the European Central Bank (ECB) rate cuts will not last forever, and “0% rates will never come again.”

Idelsons predicted that the ECB will cut its base rates to 2.5%, and the issue of whether the rate is at 2% or 3% will no longer have any dramatic effect on the strategic decisions of businesses.

Signet Bank projects a more than 20% increase in its loan portfolio this year and around 25% next year. The plan is to issue around EUR 100 million in loans over these two years.

Source: BNS

(Reproduction of BNS information in mass media and other websites without written consent of BNS is prohibited.)

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