Survey: Lower transaction costs would encourage home loans to be transferred to another bank


People in Estonia would be willing to transfer their home loan to another bank if it were easier and cheaper.

According to a Kantar Emor survey commissioned by LHV, 66% of the Estonian population would either definitely or likely consider transferring their home loan to another bank, or refinancing their home loan, if doing so were easier and cheaper that it is now.

Younger respondents, i.e. 18–34-year-olds (80%), would be more likely to consider transferring their home loan to another bank. Estonian respondents are also more likely to consider transferring their home loan to another bank (70%), while 56% of people of other nationalities would consider this option.

‘The results of the survey clearly show that the initiative of Eesti Pank and the Financial Supervision Authority to make home loan conditions more flexible would have a significant impact on the home loan market,’ the Head of Retail Banking at LHV, Annika Goroško, says, referring to the proposals put forward at the end of February to increase competition in the banking sector, which, among other things, recommend considering reducing the role of notaries and the need for a new appraisal deed when modifying an existing home loan mortgage, as well as cutting banks’ fees for early repayment of home loans.

‘Our experience also shows that if you make it easier for clients to refinance their loans, people are immediately more interested in moving to another bank. For example, when we refunded notary fees to our clients as part of a campaign, it quickly boosted interest in refinancing,’ Goroško explains. According to her, home loan modifications are a natural phenomenon: the duration of the average home loan is about 10 (ten) years, during which time both the opportunities and the needs in a person’s life can change significantly.

According to Goroško, at LHV Pank, termination of the home loan agreement and repayment (in full or in part) is already free of charge and this flexibility has been well received by clients. ‘A home loan repayment fee generally puts the client in a situation where they have to wait several months to make the change without losing money. We do not see any reason to ask for a fine if people reduce their commitments responsibly,’ she says.

As a home loan is one of the biggest financial decisions and taken for a long period of time, Goroško also recommends that any changes to a home loan should always be carefully considered. It is not worth refinancing a home loan lightly, merely to get a small interest rate change – you should also think about the other implications and whether a new bank might be a better fit for your finances.

According to Goroško, the current economic situation has led to greater interest among people towards refinancing their home loans. ‘Extending a loan allows for a reduction in the monthly payment, while the total cost of the loan increases. Moving the loan to another bank can also bring down the monthly service fee costs for the client or make the interest rate more favourable,’ the Head of Retail Banking at LHV says.

Bank transfer is most affected by more favourable interest rates

As expected, the vast majority (88%) of respondents answered the survey question – what home loan services or features they are looking for in a new bank – stating that they were interested in a better interest rate. A total of 39% of respondents said that more favourable fees were important, while 19% cited more flexible loan repayment options. Among respondents, 14% appreciated more convenient services.

Goroško recommends that clients looking to take out or refinance a home loan should take a comprehensive look at the services offered by the bank, and also explore flexible loan terms and more convenient and favourable payments. ‘Stricter terms and conditions or higher everyday banking fees can lead to unexpectedly high extra costs,’ Goroško says, adding that convenient services ensure peace of mind over the long term.

The survey was conducted by Kantar Emor on behalf of LHV. A total of 1,093 people responded to the survey.

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