In English

Until the end of 2025, a Lithuanian who owned three mid range apartments and rented them all out could pay essentially zero in annual property tax. The old system gave every residential property owner a 150000 euro exemption. Municipalities set rates so low that most small landlords never saw a bill worth noticing. From January 1, 2026, that is gone. Any residential property you own beyond your declared main home gets pooled with the rest and taxed on the combined registered value under a progressive rate. It starts at 0.2 percent and climbs to 1 percent. VMI prepares the assessments automatically and sends them out, which means a fair number of people this year will open an envelope and find a number they never expected. Most people who own a second property in Lithuania know this reform happened. Very few have done the arithmetic on what their specific bill will look like. The ones who have are mostly surprised. I spoke with a logistics worker in Kaunas who owns three apartments she accumulated over twenty years. One of them inherited from her mother and treats them as her retirement fund. When I walked her through the numbers, she said she needed to sit down.

A man I know in Vilnius, a software developer in his late thirties, has about 17000 euros sitting in his second pillar pension fund, and he genuinely cannot decide what to do with it. He has been thinking about it for months. He has talked to friends, asked his accountant, read three or four explainers, and the file on his kitchen table is still open to the same spreadsheet he was staring at in November. The withdrawal window opened on January 2, 2026, and runs until the end of 2027. Every quarter, he tells himself he will decide by the next one. He is not unusual. A survey by Spinter Research, commissioned by InRento, found 45 percent of Lithuanian savers plan to pull their money out during the window, and another 35 percent have no idea what they are going to do. Three out of four people with second pillar accounts are either leaving or still frozen at the kitchen table. About 1.4 million Lithuanians have money in the system, and total assets sit above 9 billion euros. The Bank of Lithuania has modeled scenarios where 40 to 60 percent of savers exit, pulling up to 3.4 billion euros out over the two year window.

Not long ago, the governor of the Bank of Lithuania stood in front of reporters and called the situation with deposit rates “obscene.” The ECB had been raising rates for months, mortgage rates had crossed four percent, consumer loan rates were pushing nine percent, and Swedbank was still paying its Lithuanian depositors a flat 0.2 percent on fixed term accounts. SEB had moved to 0.6 percent. On a ten thousand euro deposit left for twelve months at Swedbank, that worked out to twenty euros in annual interest, which is roughly what you’d tip a waiter for a nice dinner in Vilnius. The central bank’s message was unusually blunt for an institution that typically speaks in careful hedged language: banks were passing every rate increase to borrowers and almost none of it to savers, and that was not acceptable. What the regulator probably did not fully anticipate was that the pressure would eventually come not from regulatory speeches but from a British fintech with a Lithuanian banking licence.

When a loan officer in Vilnius shows a buyer how a 35 year term reduces their monthly payment versus a 25 year term on the same loan, the number looks compelling. On a 153000 euro mortgage at around 3.7 percent interest, the difference is about 132 euros a month, which covers a phone bill, a grocery run, and something left over. February 2025 was the biggest month for mortgage lending in Lithuanian history, with banks issuing close to 240 million euros in new housing loans, nearly twice the volume from the same month in 2024, and that record sits partly on falling rates pulling buyers off the sidelines and partly on something quieter, which was that some of those buyers qualified for their loans specifically because the bank agreed to extend the repayment term. Interest rates on new housing loans had dropped from roughly 5.4 percent in mid-2024 to about 3.7 percent by mid-2025 as ECB cuts worked through the system, and the total value of new housing loans issued between January and July 2025 came to around 3.9 billion euros, with the outstanding mortgage portfolio growing nine percent since the start of the year to about 14.4 billion euros by August. The average maturity for a Lithuanian mortgage has historically been around 30 years, and a meaningful portion of new loans now go out to 35. The 132 euro monthly saving is real. What the buyer does not model, at least not in my experience of talking to people who have just signed, is what that saving costs over the full life of the loan.

Aurimas Vaška, a contractor from Kaunas, took out a 6000 euro consumer loan in the spring of 2022 to cover a bathroom renovation he had been putting off for two years. At the time, his bank quoted him a rate of 11.4 percent APR, which he accepted without shopping around because the process was straightforward and the monthly payment of just under 140 euros felt manageable against his income. He didn't think much about the rate after that, paid his installments, and generally ignored the financial news cycle about central bank policy through 2023 and into 2024. By late in that year he found out, through a conversation with a colleague who had just borrowed from the same institution, that new consumer loans were going out at 9.1 percent and had been for some months. That's when Vaška called his branch manager and asked, for the first time since signing, whether his rate could be revised. It couldn't, the manager told him, at least not partway through the contract, but the number of similar calls that manager was probably fielding by then is roughly the story of where the Lithuanian consumer lending market finds itself in 2025.

A Romanian software engineer I spoke to last year had been living in Amsterdam for three years, paid rent on time every month, held a permanent contract with a Dutch employer, and still got rejected for a 5000 euro personal loan from his local bank. The reason, according to the letter he received, was insufficient credit history. He had plenty of credit history back in Romania, including a mortgage he'd paid off early, but the Dutch lender couldn't see any of it. The BKR, which is the Dutch national credit register, had no record of him because he'd never borrowed in the Netherlands. As far as the system was concerned, he was financially invisible.

On January 28 this year, a coalition of credit union bodies gathered at Westminster to launch what they’re calling the Credit Union Growth Plan, a document that lays out how the sector intends to double its membership from 2.2 million to 4.4 million over the next decade and, in doing so, unlock something like 6.4 billion pounds in additional annual economic growth. The ambition is significant, and I think it needs to be, because by almost any international comparison, the UK’s credit union sector is embarrassingly small. Only about 4 percent of adults in Britain have a credit union savings account, which puts the country well behind Ireland, where the figure is north of 70 percent, and even behind Northern Ireland, which sits at around 25 percent despite sharing a government and a financial regulator with the rest of the UK. When I first saw those numbers side by side, I assumed there was a data error, but the FCA’s Financial Lives 2024 survey confirmed it, and the Bank of England’s own quarterly statistics tell a similar story.

February 2025 was the biggest month for mortgage lending in Lithuanian history, with banks issuing nearly 240 million euros in new housing loans, which is 92 percent more than the same month a year earlier. That number alone tells you something about where the market is heading, but it only captures part of what is actually happening in the country’s real estate sector right now.

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.

Lithuanians acquire their first home with a loan before major life changes: the birth of children or at least their growth to the need for their own room, career changes. Last year, loans were most often chosen by people aged 26-30 and 31-35, representing 27 percent and 26 percent of all applications respectively. Combining respondents, the group from 26 to 35 years old makes up more than half of all applicants. Such data is revealed by "Bigbank" data.