Anne Pärgma, head of Swedbank's housing loan department, told ERR that the six-month Euribor falling to around 2 percent has clearly boosted the mortgage market in recent months, with a marked increase in contracts signed.

"The number of mortgage contracts signed in June was very high. People bought both new and second-hand homes — the market was very active," she said, adding that many potential borrowers who had previously been on the sidelines are now actively reconsidering their options.

According to Pärgma, the Euribor dropping to the 2-percent range seems to represent a psychological threshold, making borrowing feel more affordable and drawing back clients who had shelved their plans due to high interest rates.

"If Euribor continues to fall or remains stable at this level, it could lead to higher transaction activity in the real estate market and increased mortgage sales," she predicted.

She noted that the market tends to pick up in the spring and summer anyway, but the looming VAT hike also played a role in accelerating deals, with many finalized in June ahead of the rate change.

Coop Pank board member and CFO Paavo Truu noted in a stock exchange release that the total mortgage lending volume in June reached a record €268 million — surpassing all previous highs.

"The upcoming VAT hike of 2 percentage points, effective from July, had a significant impact — customers wanted to purchase new development homes before prices went up," Truu said.

New developments out of many people's price range

Allan Parik, chairman of the management board of SEB Estonia, told Vikerraadio in a recent interview that the mortgage market began picking up in the second half of last year, but the recent surge has still taken the bank by surprise.

The main reason, according to Parik, is that Estonia's labor market has remained remarkably strong despite broader economic uncertainty.

Estonia's employment rate is higher than it was in 2019 — the end of what you might call a golden decade, where each year kept getting better. The economy was growing and there was a widespread illusion that things could only improve, he said.

Parik noted that looking at the nature of real estate transactions, new developments now make up a smaller share than ever before.

"Let's be honest — the prices of new developments are still relatively high," he said. "At least two-thirds are still transactions on the secondary market, where people can afford it but are also confident enough to want to improve their living conditions somewhat."

LHV issued 40 percent more loans in the first half of this year compared with the same period last year. According to Catlin Vatsel, head of personal financing at LHV, the bank's mortgage portfolio crossed the €1.5 billion mark in February, and in the first quarter, one in four home purchases involved LHV.

At the same time, Vatsel assessed that both consumer confidence and real estate market activity remain consistently low. Around one-fifth of total monthly loan volume consists of refinancing.

"Based on our data, we associate the active summer period in the mortgage market more with refinancing than the VAT hike, because many banks were running aggressive refinancing campaigns," she said.

As of June, LHV's household loan portfolio grew 8 percent year over year, while the bank increased its total loan portfolio by 28 percent annually.

Lasnamägi key on the aftermarket

Peep Sooman, sales partner at Pindi Kinnisvara, told Vikerraadio's "Uudis+" program that the market's freeze is starting to thaw, as confidence is returning among people who have held off on buying property for years due to uncertainty. The real estate market no longer feels like something toxic or untouchable, he said.

According to Sooman, there was notable movement on the secondary market in Tallinn's Lasnamäe district, which he described as a bellwether for the entire residential property market.

"The first signs of stronger activity in Lasnamäe actually appeared last year, and since they weren't just short-lived blips, we already sensed that the secondary market was beginning to gain momentum — and that has now fully played out in the first half of 2025," Sooman confirmed. "That momentum has since spread to smaller towns as well."

He added that the number of transactions in July — typically a quiet summer month — was also quite strong, showing clear signs that market participants are becoming more active.

Paavo Truu from Coop Pank confirmed that loan applications remained steady in July for home purchases, construction and renovations.

SEB saw similar trends. Allan Parik noted that the pickup in mortgage activity began in the second half of last year. While the June surge was partly attributed to the upcoming VAT increase, lending remained brisk in July as well.

"It appears that, from a private individual's perspective, the willingness to take on long-term obligations signals a return of confidence," Parik said.

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