Fri, 30 Mar 07
Estonians taking advantage of a booming property market may suffer as a result of inevitable future rises in interest rates, reports the BBC...
Ever since banks started offering low interest mortgages about five years ago, the growth of the property market in
The boom is worrying some people, not least since household debt in
At the national Bank of Estonia, Sven Meimer, the head of the Financial Stability department, says it is impossible to predict how people will cope with paying the money back if and when the economic situation changes.
"If things keep going well, it's likely nothing will happen. He added: that's what the bank forecasts for the next two years. Estonians, however, don't know what it means to have a loan for 30 years, and when interest rates rise rapidly, what it means to pay back more than you had planned. We can't tell how they'll react."
Few share such concerns. Debt levels have a long way to go before they reach those of wealthier European countries, and Estonians are feeling optimistic.
For a while, the country was even hoping to be among the first new member states to adopt the euro in January 2007, though that plan has now been delayed until 2008 after
Economic growth continues
Fifteen years after regaining independence from the
After the difficult transitional years of the 1990s, when the country undertook major restructuring and weathered the Russian economic crisis,
Last year the country's economy grew by 9.6% and it is not about to slow down. The National Bank of
Soaring house prices
While growth is rapid throughout the economy, it is fastest in the property market. Ordinary Estonians, now getting the chance to buy a home, are jumping at it - making house prices rise faster than in any other country in
Having already lived through enormous changes, the enthusiasm with which people are buying property reflects their confidence that whatever may come, they'll be able to weather the storm.
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