"Although
base interest rates in the euro zone are growing at the same rate for everyone,
in the end, Lithuanians' pockets suffer the most. Economist Marius Dubnikovas
says that this is due to the fact that Lithuanians usually choose variable
interest rates. However, he explains that the former zero interest rates were
not the norm, but rather today the market is back to "normal
interest".
"There are
several aspects. In Lithuania, we have such a uniqueness that most of our loans
are with variable interest rates. This means that when interest rates change,
all market interest rates change - EURIBOR has a direct impact, depending on
its maturity.
In Western
countries, especially the United States, there is an increase in fixed interest
rates or even fixed interest rates for the entire period. This is where the
differences come in. If someone took out a loan 10 years ago, or even three
years ago, and fixed their interest, then, obviously, this interest does not
change.
I wonder why
people don't go for fixed rates, which is because there is no supply in our
market to fix for say 10 or 20 years. This is where the huge difference
appears," he said.
According to the
economist, one more reason why, in the end, we pay more can be considered the
common love of Lithuanians for real estate.
"This means
there is a huge demand for loans, and when it is there, it works from the other
side as well - banks' margins are, admittedly, a little higher," said M.
Dubnikovas.
He explained
that, on average, loans cost residents about increased 2.7 thousand Eur. per year.
"The burden
will fall on the shoulders of people who have chosen variable interest."
Some have already understood this, some have already received larger bills, and
some will receive and understand this.
Comparing last
year's loan installments with this year's installments, they often differ by 25
percent, and are even increased by a quarter. That pressure, it will be.
Considering the
fact that the average loan in Lithuania was 90 thousand. EUR, this is an
interest increase of 3%, which has already happened, which amounts to about 2.7
thousand EUR per year or approximately EUR 240 per month," he calculated.
According to the
economist, the Bank of Lithuania, which oversees the market, took action and
regulated that it was not possible to borrow more than the amount that requires paying more than 40 percent of
income contributions, when servicing our loans.
"This means
that no more than 40% of of our income goes to all loans to be be serviced, which makes our market
safer <...>
What else the
Bank of Lithuania can do is to discuss whether we should have mechanisms where
people can fix their loans before the repayment period and have a very clear
forecast of how much they will have to pay," he suggested.
Speaking about
EURIBOR, the economist explained that most of the interest rate hike has
already passed.
"Most of the
jump has already happened. If we look at the USA, which really demonstrates how
interest rates can move, it currently has 4.5%. base interest already in the
middle of the year, it is predicted that the number may reach 5%, but it will
start to decrease from the middle of the year", he said and predicted that
the EURIBOR should rise for the rest of this year and reach 4%.
"We are
returning to normal interest rates as far as EURIBOR is concerned, 2.8-3
percent. in the longer term is the median. "What we had before that was
abnormal, because money cost nothing and a whole generation of people grew up
on it," said the economist.
Fixed interest rates increase banks' risk, so such loans are
usually more expensive. Since we are still not paid European wages, and the
prices in the common market are already European, that is why we are poor. Those
fixed interest rates are too expensive for us. Therefore, we take risks and
take variable interest rate. Now the crisis is here, we will suffer because of those
variable interest rates.
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