
The six-month European European interbank offer rate (Euribor), to which most housing loans in Estonia, was at the end of the week of
2.642%. While January 14 half-year Euribor increased to 2.685%, the January 17 it dropped to 2.642%, wrote ERR.A week earlier – 10 January – the rate
was 2.641%. At its peak in mid October 2023 year, the level of interest rate was over 4%. Maximum value of the Euribor rate in history was recorded
in the winter of 2008 year – almost 5.5%. The six-month Euribor has a big impact on Estonian people, as the
majority of housing loans in the country. In Estonia the average size of housing credit for the last few years is
100 000 euros, and the term of credit is 20-30 years. LHV: In the last decade interest rates have remained very low, and this
has given people the impression that it makes meaningful to take as much as possible
more credit now, When it became clear that interest rates were rising, people began rethinking their credit commitments. The interest rate on bank loans is usually consisting of the base margin of the bank and the rate euribor. euribor (Euro Interbank Offered Rate) – is the average interest rate of loans between European banks. For banks it means the interest on mutual unsecured loans. Besides interbank lending, euribor plays a role for private individuals
who borrow housing loans from the bank. In this case the rate euribor begins to affect the amount of the payment of the loan from when it rises above zero. Last six years the rate euribor has remainednegative, which means that
it was equalized to zero in the credit agreements. But this is very likely to change, as in the latest reporting of the central bank financial markets are predicting the growth of euribor in the nearest future. Since, for example, housing credit is usually taken for a>few decades, it is considered that in this time the euribor could may rise to zero and more. That’s why banks always recommend those who are going to take a loan, calculate payments at an excessive interest rate, for example
6%, to be sure that you will be able to pay the credit and in the increase in the rate euribor. The same something banks do, calculating the maximum amount of credit for the client, to comply with the principle of responsible lending
and to avoid the potential unpleasant surprises. It is important to realistically evaluate your needs and capabilities and live not at the limits of your capabilities. According to the Lending Standards, the liabilities shall not be more than 50% of income, but it is recommended not to exceed 40%, to leave funds and for everyday expenses, and for unexpected expenses. For to present the effect of raising the interest rate, it is
remarkable, that in the case of an average housing loan (about 100 000 euros for 25 years) an increase in the interest rate by 1% means an increase in the monthly payment of approximately 50 euros. How fast and to what value on the Most Deal will increase euribor, it is practically impossible to predict. This depends in much on the current decisions of the central banks in forming themonetary policy. Nevertheless, the talk of raising the euribor has caused people to ask whether
theinterestand, consequently,themonthlypaymentsofthehousingloan.Inthe lastmonthswebeganofferingfixedratestoclientswhowereinterestedinfixingtheirrates.It is not uncommon forclientstoaskforthis,withtheintentionthattheycouldfixtheircurrentbaserate.Actuallytheinterestrateonahousingloancanbefixedforfiveyears,whilethefixing rateisrevisedeveryweekinaccordancewithmovementsoftheeuriborandthelastdecisionsoftheEuropeanCentralBank.