Lithuania's housing loan sector is experiencing significant changes that are shaping a new borrowing culture. Since new real estate credit regulation requirements took effect in May, loan applicants have become notably more active in considering their interest rate options.

The legislative amendment that came into force in May fundamentally transforms the housing loan provision process. Major credit providers are now required to present both interest rate options to each client: variable and fixed rates for a period of no less than five years.

These changes were immediately reflected in statistics. While long-term fixed interest loans accounted for only 1.5% of the total housing loan flow during January-April, this share increased to 3.6% in May. Although the growth is not yet dramatic, the trend clearly shows that borrowers have begun to recognize alternatives.

Market analysis reveals that the difference between fixed and variable interest rates for secured housing loans remains around 0.4 percentage points. Interestingly, the average fixed interest rate is currently lower than the variable rate, making it more attractive from a long-term perspective.

Activity in the housing loan sector remains high - the portfolio grew by 11.2% year-over-year, with 2,700 new housing loans granted in May. The annual change in new housing loan flows reached 62%.

Residents are intensively using opportunities to review existing loan terms. The volumes of refinancing and renegotiations in May remained significantly higher than before the regulatory changes took effect in February.

Statistics show impressive numbers: average refinancing flows in February-May 2025 were three times higher than in 2024. Renegotiation flows grew even more - from €94.3 million in 2024 to €334.2 million in the February-May period.

Refinancing results are encouraging for borrowers: in May, residents reduced their margins by an average of 0.55 percentage points when refinancing housing loans, and by 0.35 percentage points when renegotiating.

The other side of the coin is the term deposit market. Consistently declining interest rates are creating negative appeal for this form of saving. In May, term deposit interest rates were 1.9% for residents and 2% for businesses - 1.5 percentage points lower than a year ago.

The flow of new term deposits for residents became negative in May, reaching -€97.7 million. Despite this, the share of term deposits in Lithuania still accounts for 30% of the resident deposit portfolio, which is 11% higher than the eurozone average.

The corporate sector also shows rapid growth rates. The annual growth of corporate loan portfolios reaches 18.7% - one of the highest rates in the eurozone, where average growth is only 2.5%.

The volume of new loans granted to companies increased by 36% over the year and amounted to €441 million. This result is more than twice the long-term average (€215 million), while the interest rate on new loans to companies was 4.6% in May.

Current market changes are shaping a new reality for housing finance. Residents are increasingly oriented toward conscious interest rate selection, while bank competition in the refinancing sector provides additional opportunities to optimize loan terms.

The declining attractiveness of term deposits may encourage the search for alternative investment solutions, while the corporate sector demonstrates economic vitality and development needs.

The spread between new loan interest rates and resident term deposit rates remains significant at 1.8 percentage points in May, indicating continued profitability incentives for banks while highlighting the cost differential for consumers.