Ilustratīvs attēls no Pixabay.com.
The proposal is known by most, I assume, otherwise here is a description.
In what follows, I am not arguing in order to support the banks – rather, to support Latvia’s economic development, which I think will be jeopardized by this ill-thought proposal.
Proposals to help consumers can certainly have merit. This, they will have when a) circumstances are very unusual and b) when they refer to vulnerable groups. A good example of when this was relevant was last year’s very high energy prices. A one-off (we hope) phenomenon which was threatening especially low-income groups.
Neither is fulfilled in this case. Mortgage rates in Latvia are typically based on a Euribor interest rate (a rate at which banks can borrow from each other) plus a certain percentage, here often 1.6 percentage points. Euribor rates have certainly gone up (see Figure 1) but they are far from unusually high – rather they were unusually low for a long period. Why support households for having to pay normal interest rates?
