OREANDA-NEWS. August 22, 2012. Compared to the peak of borrowing five years ago, the six-month Euribor rate has dropped to less than one seventh of that high: On 14 August 2007, the base interest rate was 4.571% while today it is 0.625%, reported the press-centre of SEB.

Triin Messimas, Development Manager of Private Loans at SEB: “This change in the base interest rate has helped to significantly alleviate the payment burden of borrowers, which is especially felt by those who perhaps overestimated their solvency during the boom and have been struggling to make their payments in the last few years. For instance, the monthly annuity payment of a 128,000 EUR (appr. 2,000,000 EEK) loan would have been 700 EUR on the basis of the six-month base interest rate as at August 2007, however, according to the current rate it would be just 425 EUR or 40% less. This holds true if the interest marginal is 0.6% and the loan matures in 30 years.”

A survey of home borrowers conducted by SEB in the spring indicates that, on average, a family with a home loan paid 18 per cent of their incomes to service loans. Considering that, 56% of the households felt that their loan payments were reasonable while 44% found them excessive. In the spring there were 3% of home borrowers who spent more than half of their incomes on servicing loans. As the continuing downward trend of the base interest rate has reduced loan payments during the past three months, the share of families whose budget is not overly stretched by loan costs is bound to have increased.

Since the beginning of 2012, the six-month Euribor has decreased by 61% and it means that compared to the beginning of the year a borrower would save 363 EUR per year or 30 EUR per month on the average home loan as it is now (37,261 EUR).