Baltic Mortgages Split by Region

The Baltic home-loan market is growing again, but no longer along a single path. In Estonia, new mortgages are becoming more concentrated around Tallinn and Harju County, while in Latvia and Lithuania regions outside the capitals are gaining weight. For banks, developers and buyers, the market is moving from a broad post-rate-shock recovery to a more selective regional contest for homes, incomes and borrowers.

Estonia’s mortgage market concentrates around Tallinn

The Baltic Times, citing Swedbank’s first-quarter data, reported that 67% of the bank’s new home loans in Estonia were issued in Harju County, the region that includes Tallinn and its commuter belt. Harju County’s share increased by 4 percentage points year on year, while the shares of the Riga region in Latvia and the Vilnius region in Lithuania both declined by a couple of points.

Anne Pärgma, head of housing loans at Swedbank, linked the divergence to the concentration of economic activity, jobs and new developments in Tallinn and its surroundings. For Estonia, this is more than bank data. It reflects a wider economic structure in which the capital region remains the main hub for salaries, employment, internal migration and new housing supply.

Latvia and Lithuania move beyond capital dominance

Latvia and Lithuania show a different pattern. In both markets, the share of capital regions in new Swedbank mortgage agreements declined slightly, while other regions became more prominent. That does not mean Riga or Vilnius are weakening as property markets, but it does suggest that housing finance is spreading more broadly across each country.

In Lithuania, the trend fits a stronger housing cycle after a record 2025. LRT reported that the Lithuanian market entered 2026 at high levels, with further demand expected from pension-system changes and looser lending rules.

In Latvia, regional growth matters for a different reason. The mortgage market has long been less developed than in Estonia or Lithuania, and housing credit outside Riga has been weaker. LSM, citing Latvian Radio, noted that banks were reporting a significant increase in housing loans in regions outside the Riga area, although part of the housing market still operates in the shadow economy.

Average loan sizes reveal the regional gap

Swedbank’s highest average home-loan amount in Estonia was in Harju County at €169,000. Tartu County followed with €152,000 and Pärnu County with €126,000. The figures show that larger loans remain concentrated where property is more expensive and new developments account for a bigger share of transactions.

At the same time, the fastest year-on-year increases in average loan amounts in the first quarter were recorded in Hiiu, Järva and Pärnu counties, at 49%, 33% and 18%, respectively. In smaller counties, such jumps should be read cautiously because a few higher-value transactions can move the average sharply. Still, the growth suggests that demand outside the main population centers has not disappeared and is becoming more visible in selected locations.

The largest declines in average loan size were in Jõgeva, Lääne and Lääne-Viru counties, down 48%, 22% and 10%, respectively. This is the other side of small markets: low transaction volumes make statistics volatile, while liquidity depends heavily on local employment, housing quality, transport access and demographics.

Harju County remains the main transaction market

According to Land Board data cited by The Baltic Times, Harju County recorded 4,105 real estate sales transactions in the first quarter. Tartu County followed with 1,016 transactions, Ida-Viru County with 692, while Hiiu County had the lowest volume with just 35 transactions.

That gap explains why Estonian mortgages are so concentrated in the capital region. Banks are more comfortable lending where transaction volumes are higher, collateral is more liquid, new developments are more abundant and the risk of selling a property after borrower default is lower. For buyers, that means more choice but also stronger competition for quality housing.

Apartment prices keep rising

In the first quarter, the average square-meter price of new apartments in Tallinn reached €4,583, up 8% year on year. Secondary-market apartment prices in Tallinn rose by almost 6%. Outside Tallinn, the average square-meter price was €3,342 for new apartments and €1,352 for secondary-market units.

The gap between new and existing homes is especially important for mortgage demand. New apartments require larger loans, but they may be more attractive because of energy efficiency, lower renovation needs and compliance with modern standards. Secondary-market housing remains more affordable, but buyers often face higher modernization, heating and maintenance costs.

Lower rates eased pressure but affordability remains strained

The recovery in Baltic mortgage demand reflects weaker pressure from interest rates than in 2022–2023. But housing affordability has not fully recovered. Swedbank Research has noted that primary-market housing affordability in all three Baltic capitals remains below pre-2022 levels, while the average Swedbank-issued apartment mortgage in Vilnius and Tallinn exceeded €135,000 at the end of 2025, almost twice the level seen in Riga.

That helps explain the divergence. In Tallinn and Vilnius, buyers face a high entry price, especially in new developments. In Riga, homes are cheaper on average, but the market took longer to recover and mortgage activity has historically been more cautious because of incomes, housing-stock structure and bank competition.

Baltic housing demand is backed by real wages

Swedbank said in its January–March 2026 interim report that housing-market activity remained high in all three Baltic countries, supported by rising real wages; the bank’s mortgage portfolio continued to grow, and corporate lending also increased.

Real wage growth matters because Baltic mortgages are often exposed to variable rates, and household budgets react quickly to changes in monthly payments. When incomes grow faster than prices and borrowing costs, buyers return. When house prices accelerate, that effect weakens quickly, especially for young families and first-time buyers.

Lithuania gets an extra push from policy

Lithuania appears to be the most dynamic of the three markets. The Bank of Lithuania said in early May that the banking sector’s loan portfolio grew by more than a fifth, reflecting strong credit activity across the economy.

Housing demand has also received a policy impulse. Earlier Swedbank Research commentary said second-pillar pension withdrawals starting in 2026 and a planned reduction in required down payments would give an additional push to Lithuanian market activity.

For the market, that means stronger demand but also a risk of overheating in selected segments. If additional household funds and easier lending conditions enter the market while new-apartment supply remains limited, prices can rise faster than incomes.

Latvia remains a catch-up mortgage market

Latvia differs from Estonia and Lithuania because its mortgage market has historically been less deep. A study published by Research Latvia argued that the country’s housing credit market needs a significant development breakthrough and that almost the entire sector is dominated by four major banks, whose lending is primarily financed through deposits.

That makes the growth of regional mortgage lending in Latvia especially important. If loans start flowing more actively beyond Riga, they can support housing-stock renewal, domestic mobility and demand in regional centers. But with limited bank competition and a high share of informal transactions, the market may grow more slowly than potential demand would allow.

Estonia faces the risk of excessive concentration

Estonia looks like the most centralized mortgage market. Harju County absorbs most new loans, transactions, new developments and higher prices. For banks, that is rational: liquidity is stronger, household incomes are higher and collateral risk is lower. For the broader economy, it creates a regional inequality problem.

If mortgages increasingly concentrate around Tallinn, smaller towns receive less credit support, renew housing more slowly and become less attractive to young families. That reinforces the existing demographic divide between the capital region and the periphery. In real estate, such a process often appears not as a sudden price fall, but as gradual liquidity erosion: homes take longer to sell, discounts deepen and renovation becomes harder to recover in the sale price.

What it means for banks and developers

For banks, the new phase requires more precise regional risk assessment. National averages say little about mortgage-portfolio quality. A loan in Tallinn, Riga, Vilnius, Pärnu, Daugavpils or Kaunas carries a different collateral-liquidity profile, employment risk and demographic outlook.

For developers, the message is to choose housing formats more carefully. Capital cities are supported by income, jobs and migration, but prices are already high. Regional buyers are more sensitive to price, down payment, energy efficiency and monthly payments. A universal strategy of building higher-priced units and waiting for appreciation is becoming less reliable.

What buyers should watch

For Baltic buyers, the key variable is not only the mortgage rate but also regional market resilience. An apartment in an expensive capital district may be less affordable, but more liquid. A regional home may be cheaper and more comfortable for everyday life, but its resale value depends on jobs, transport, schools, healthcare and demographics.

In Estonia, buyers increasingly face a trade-off between high Harju County prices and more affordable but less liquid regions. In Lithuania, demand is strengthening across several cities, including Vilnius, Kaunas and regional centers. In Latvia, recovery outside Riga could be a positive signal if banks remain willing to finance regional buyers.

As experts at International Investment report, Swedbank’s data show that Baltic mortgages are no longer a single recovery cycle after the high-rate shock. The critical risk has shifted: Estonia may end up with an increasingly expensive and overloaded capital-region market alongside a weak periphery; Lithuania may see price acceleration from new demand incentives; and Latvia may face slower growth because of limited bank competition. For investors and buyers, the central lesson is to analyze not the country as a whole, but the specific region, employment base, secondary-market liquidity and the real affordability of the monthly payment.