“These numbers certainly show that the national policy directly affects business and opportunities of population to borrow in order to improve their living conditions. The first quarter of 2015 was still the time when the mandatory returned-keys principle was in force since this norm to insolvency law was effective by early March. This is the reason why volume of the issued mortgage credits was so small. However, when returning to a voluntary returned-keys principles and activating the support programme for families to buy a housing, we reached good results,” says the President of Association of Latvian Commercial Banks, Mārtiņš Bičevskis.
According to data of the Bank of Latvia, in 2015, for purchase of a housing, households received 106 credits subject to the returned-keys principle, which is 1.2% of the total number of the issued credits. Besides, conditions to receive the loans of these credits are stricter and they are available only to those who do not find it’s difficult to make the first payment and who often do not need to borrow the assets. “Overall, we should recognise that introduction of the returned-keys principle into Latvian laws has been a very ineffective project that have resulted in losses to all the engaged parties,” has stated Gunārs Bērziņš, an economist of the Bank of Latvia.**
The total credit portfolio of Latvian banks at the end of March 2016 was 14.68 billion euros, including the credits to Latvian companies in the amount of 9 billion euros, while the mortgage loans to Latvian households constituted 4.4 billion euros. In 2015, for the first time after the crisis in 2008, there was an overall increase by 0.1% in the credit portfolio of Latvian banks, which means that the amount of newly issued loans exceed the amount of paid and written off loans.
*Data of the FCMC