What is interest? What type of interest can I choose?

An interest is a price that a customer pays for the use of money. Housing loans interest rate may be:

  • variable interest rate that consists of 3, 6 or 12 month Euribor rate + individual interest margin.
    If Euribor is negative, it is deemed to be equal to zero.
  • fixed rate with a fixed interest period of up to 5 years but no less than 12 months.
    On expiry of this period the interest rate will be either automatically changed into variable interest rate or a fixed rate with a fixed interest period may be set again by agreement of the parties.
    Please note that the borrower has a right to request the Bank to set a fixed rate with a fixed interest period of up to 5 years at any time during the period of the agreement. For more information see the Rules of Estate Related Credits Granting (in Lithuanian).

What is a margin?

A margin is a difference between the final determined interest rate for the customer and base interest rate (for instance, Euribor) which bank receives as a fee for the provided services, finalized tasks and the potential risk.

What is Euribor and where can I find Euribor rates?

Euribor is a Euro Interbank Offered Rate at which eurozone banks offer to lend funds in euros to other eurozone banks. Euribor is published by the European Money Markets Institute (EMMI). 

For more information on Euribor please see here.

How high can Euribor interest rate go?

Euribor interest rate can change (increase or decrease) depending on the market situation.

On the basis of historical data, the highest value of the most frequently applied interest rate of the 6‑month Euribor was ~5.5 %.

How is this going to affect my mortgage loan payments?

The recent hike in Euribor interest rate benchmark, which is projected to accelerate and fuel an increase in monthly loan payments, has triggered customers’ interest how it can affect their monthly loan payments.

The Bank's data suggest that, currently, the average loan amount is ~ EUR 100 000. Thus, taking into account the average loan amount and for example Euribor increase from 0% to 4%, the provisional average loan instalment increase is ~ EUR 100 - 210 per month (depending on the interest margin and the loan term).

The following are examples of how the increase of Euribor could impact monthly loan instalments:

Provisional average loan instalment/per month depending on Euribor value, EUR*

Loan amount (EUR) 0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% Spread when applying 0% and 4% Euribor (EUR)
30,000 152 159 166 174 182 190 198 206 215 63
50,000 253 265 277 290 303 316 330 344 358 105
80,000 405 424 444 464 485 506 528 550 573 168
100,000 506 530 555 580 606 633 660 688 716 210
150,000 759 795 832 870 909 949 990 1,032 1,075 316
200,000 1,012 1,060 1,109 1,160 1,212 1,265 1,320 1,376 1,433 421

*The provisional calculations were carried out by applying the interest margin of 2%, assuming that the duration of the loan agreement is 20 years, and the loan repayment method is annuity.

With Euribor interest rate in negative territory over the past few years, many customers have paid the interest margin only and forgotten that monthly loan payments are subject to fluctuations in Euribor, which means that when it goes up, monthly loan instalments might rise too. 

Where can I find my loan agreement Euribor rate and info, when will this rate change?

You can find this info in your internet bank: Loans → My liabilities → Loans or Leasing → push on credit agreement number (then all information about interest rate will be visible).

How can I change my loan agreement so that the increase of Euribor interest rate wouldn’t affect my loan payments? Whom should I contact?

Choosing a fixed rate with a fixed interest period over a variable interest rate is a good idea if you want to avoid any possible interest rate fluctuations and thus any possible increase in your loan instalments. For both new and existing mortgage loans, you can select fixed rates with a fixed interest period up to five years. This means that interest rates will not change during the selected period of time and the customers who chose this type of interest rates will pay fixed monthly instalments that will remain unchanged until the date set in the agreement with the Bank.

With fixed rates your monthly loan instalments will not be affected by economic fluctuations such as the sharp rise of the benchmark Euribor rate. Once the fixed period expires, the fixed interest rate will convert to the variable interest rate in accordance with the terms and conditions set in the agreement.

If you decide to choose fixed rates, you will need to complete a free form application in your internet bank: Letters → New letter → Free form application
As soon as we receive your application, we will contact you to discuss and agree on individual terms and conditions. 

Please note that the fixed interest rate is higher than the variable interest rate and if you want to repay your loan early, an early prepayment fee may be applied.  

What is the early repayment fee, if interest rate is fixed for longer than 12-month term?

The early repayment fee and conditions for its calculation is usually specified in the loan agreement.

This fee is calculated as compensation for potential costs of the Bank directly linked to the early repayment.

Unless otherwise specified in the loan agreement, the fee is calculated according to the formula:

I = (ratio K * P),

where I – early repayment fee;
P – loan amount being repaid early;
Ratio K – value calculated by the Bank which depends on the financial market interest rates change, the rest of the period to a fixed rate expiry of the loan agreement and the final repayment date.

This fee can be applied also in case if during the period of fixed interest rate the following changes to the loan agreement are made:

  •  the interest rate fixed for longer than 12-month term is changed into the interest rate changed on a 3, 6 or 12 month basis;
  •  the interest rate fixed for longer than 12-month term is changed into a lower interest rate fixed for longer than 12-month term;
  •  the loan currency is changed;
  •  the effective period of the interest rate fixed for longer than 12-month term is shortened;
  • the loan amount provided by the agreement is reduced (or the entire loan amount is not drawn-down).

In such cases, the calculation of the fee is based on the outstanding loan amount but not on the pre-paid loan amount.

Whom should I contact, if I decide to apply for interest rate fixation?

You will need to complete a free form application in your internet bank: Letters → New letter → Free form application.

As soon as we receive your application, we will contact you to discuss and agree on individual terms and conditions.

Whom should I contact, if I have additional questions about my loan?

You can find more info in frequently asked questions or send us a message via internetbank.