Economic challenges in 2023 did not stop consumption: Lithuanian residents continued to borrow

The challenges of rising interest rates and inflation did not stop consumption in Lithuania in 2023. In total, the volume of consumer loans issued in the country exceeded 1.1 billion at the beginning of this year. euro limit, and market participants consider that despite the macroeconomic changes that affected some consumers, most of them not only remained financially capable, but also increased their needs.

According to the Bank of Lithuania, the volume of consumer loans issued in January this year was 1.101 billion. euros, or 17 percent. higher than a year ago. Meanwhile, in February this year, 1.109 billion were already issued in the country. of consumer loans worth EUR.

“In Lithuania, the amount of consumer loans is the largest in history. Borrowing volumes did not stop last year. On the contrary, individual market participants feel an even greater growth in consumption, determined by competitive circumstances and market redistribution,” says Julius Ivaška, Director of the Business Department of Urbo Bank.

He notes that consumers carefully evaluate their needs: the “shortest” loans with a repayment period of up to one year have the lowest share in the overall statistics, with the largest number of loans issued for periods exceeding 1 year. The latter are likely to finance large purchases, housing needs, car purchases or repairs.

The portfolio of consumer loans issued by Urbo Bank last year reached 37.65 million. euros and was 21 percent. higher compared to the end of 2022 (31.022 million euros).

“At the same time, it is important to note that last year the average size of the issued consumer loan increased by an average of 10 percent.” Considering the other side, that the interest rates were raised in order to cool down inflation, which increased the expenses of all of us, and the Lithuanian labor market was touched by a light wave of job cuts, it could not but affect consumption as well. The increase in requests for postponement of consumer credit installments was, however, insignificant – up to 0.5 percent compared to the previous year,” the interviewer notes.

According to him, taking into account the fact that the borrowers’ financial capacity, reliability and ability to fulfill their financial obligations are evaluated when applying for financing, there is no doubt that consumption and borrowing increased by financially capable consumers.

According to J. Ivaška, although consumer loans are issued in a few minutes, the client is checked according to the criteria of responsible lending.

“If a resident does not have a sufficient permanent income, does not pay bills on time, is on the list of debtors – of course, the responsible financial institution will not grant him a loan,” says the director of the Business Service of Urbo Bank.

Among the consumer loans issued by the bank last year, 52 percent their recipients intended to allocate the borrowed funds for consumption, 40 percent. took out a loan for house repair or furnishing, and the rest borrowed for a car.

The entire portfolio of loans granted by Urbo Bank increased by 24.6 percent in 2023. up to 317.4 million euros.