High inflation and rising Euribor rates have affected the lending market in Europe in different ways. While in some countries the pace of lending has sharply slowed down, in others the volume of loans, on the contrary, has increased. For example, in Poland the number of mortgage loans has even tripled. The reasons for this were explained by the Credit Information Bureau and the Consumer Rights Protection Center. Bureau data show that in Latvia in the fourth quarter of last year, compared to the same period in 2022, the number of loans increased by 6.7%, at the same time the volume of mortgage lending decreased by 9.9%. At the end of last year, lending dynamics in Central and Eastern Europe were very different. For example, in the Czech Republic and Romania, the volumes of issued loans increased significantly compared to the last quarter of 2022 – consumer loans by 62.7% and 38.5%, respectively, and mortgage loans by 44.1% and 28.5%. According to Intars Mikelsons, a member of the board of the Credit Information Bureau, this indicates strong demand and favorable lending conditions in these countries. In turn, in Poland the volume of mortgage loans has even tripled since the country launched a subsidy program for the purchase of first homes. At the same time, in Austria and the Netherlands there was a significant contraction in the lending market. The Consumer Advocacy Center (PTAC) points out that the growth in lending in Poland, the Czech Republic and Romania must be assessed in a global context. These countries have received a significant influx of Ukrainian refugees relative to their population, and it is likely that the majority of asylum seekers are working and seeking to improve their living conditions, thereby stimulating consumption and thus consumer lending. The number of refugees may also contribute to tensions in the real estate sector, creating demand for rental housing as cheap as possible. PTAC has observed that local residents see income opportunities by creating additional demand for mortgages that might not otherwise exist. “In the case of Romania, the demand for loans is also growing due to high inflation – in January the annual rate reached 7.3%. People understand that their money continues to lose value, so they do not save it, but invest it. It is worth paying attention to that in none of the countries mentioned there is a euro, there is a national currency and this may be an important nuance why lending is developing there – in comparison with the European countries that are part of the eurozone (Austria, the Netherlands, Latvia) and which centrally inhibit inflation,” – comments PTAC director Baiba Vitoliņa. According to the Credit Information Bureau, the number of consumer loans in Latvia in the last quarter of 2023 increased by 6.7%, and the total amount by 11.5%, compared to the end of 2022. In large banks, the number of transactions increased by 37%, and the total amount of loans issued by 50%. In the non-banking sector the percentage increase was small. In turn, fewer housing loans were issued during the indicated period. The number of contracts decreased by 9.9%, and the amount – by 11.3%. According to Mikelsons, mortgage lending is hampered by high interest rates, however, not as much as, for example, in Italy – where the number of loans issued over the year decreased by 27.7%. There is also a tendency that residents do not spend their savings, but use them for early partial or full repayment of obligations. Austria and Poland maintain a stable probability that residents will not cope with their loan obligations. While in Slovakia, Italy and the Czech Republic there were minor fluctuations. Currently, the Czech Republic has the highest probability of default. In Latvia the situation has stabilized. If in 2022 the percentage of overdue contracts varied by quarter, then last year it stabilized. In Latvia, the share of consumer loans overdue by more than 90 days in the first year of the agreement was 9.5% at the end of 2022, but fell to 4.6% during the year. Mortgage debt in the first year of the contract remains very low and ranges from 0.2 to 0.3%, while, for example, in Poland it reaches 1.7%. In Latvia, all consumer lending agreements, regardless of the time of their conclusion, are overdue by more than 90 days in 5.3% of cases, compared, for example, with 9.9% in Poland. In turn, only 1% of borrowers do not make payments on housing loans on time in Latvia, while in Hungary, for example, this figure is 5.3%. “The heating season is always a difficult challenge for residents, as utility bills increase significantly. Our data shows that last winter this challenge was successfully overcome and the total debt did not increase either in the lending sector or among debtors from service providers. In terms of Latvia's payment discipline on mortgage loans is very good. In addition, the discipline on repayment of consumer loans has also improved. This indicates that in difficult economic conditions, residents continue to pay for housing, but are trying to save on other household expenses. with residents of other countries in Central and Eastern Europe,” comments Michelsons. PTAC recognizes that out-of-court debt collection mechanisms are well developed in Latvia. Once a debt is past due a certain number of days, non-bank lenders sell it to a licensed debt collection company. This makes consumers cautious and forces them to think carefully about repaying their debt.