Lithuanian govt in favor of obliging banks to also provide fixed-rate loans

VILNIUS – The Lithuanian government on Friday agreed to oblige financial institutions to provide consumers with a real opportunity to choose the type of credit interest rates and to get loans with both variable and fixed, for a certain period, interest rates.   

If unable to allow fixed-rate borrowing for at least five years, the lender would have to offer the borrower a similar instrument to reduce or manage the risk of fluctuations in variable interest rates for the same period of time.

The Finance Ministry proposes to restrict such requirements to lenders with a real estate loan portfolio of 50 million euros or more.

The amendments to the Laws on Real Estate Related Credit and on Insurance of Deposits and Liabilities to Investors, proposed by the ministry and approved by the government, will now be discussed by the Seimas.

According to the explanations of the amendments initiated by the ministry, lenders in Lithuania currently do not offer fixed interest rates to their customers or do not offer them actively.

According to the Bank of Lithuania, loans with interest rates that do not change throughout the contract period are basically not offered in Lithuania. 

“The provision of such loans is also not common in other EU countries of similar size and banking sectors, but there are EU countries where loans featuring a fixed rate for a certain period of time account for the majority of all real estate loans, such as Slovakia and Ireland,” the Finance Ministry noted.  

The Association of Lithuanian Banks does not support such amendments, while the central Bank of Lithuania says that the lack of a fixed (or fixed for a certain period of time) interest rate product on the housing lending market in Lithuania cannot be solved naturally.

This year's survey of commercial banks conducted by the central bank has shown that demand for housing loans continues to decline.