Drawdowns of vehicle loans drop in Q2: Bank of Finland

Finnish households drew down a total of EUR 536 million of new vehicle loans from other financial institutions (OFIs) in the second quarter of 2024, which was about 20% less than a year earlier, according to the Bank of Finland.

Meanwhile, vehicle loans drawn down by households from credit institutions totalled EUR 580 million, representing a year-on-year growth of approximately 20%.

In total, new vehicle loans drawn down from other financial institutions and credit institutions in the second quarter of 2024 totalled EUR 1.1 billion, which is about 3% less than in the same period last year.

The average interest rate on vehicle loans granted by credit institutions is slightly higher than on those granted by OFIs. The annualised agreed rate on vehicle loans drawn down from OFIs in the second quarter of 2024 was 5.1%, while the effective annual interest rate, which also includes other expenses, was 7.8%.

In contrast, new vehicle loans drawn down from credit institutions in the same period carried an annualised agreed rate of 5.4%, and new agreements carried an effective interest rate of 8.2%.

The majority of vehicle loans, about 70% of those drawn down from OFIs and over 90% of those from credit institutions, had a fixed interest rate in the second quarter of 2024.

In the second quarter of 2024, Finnish households drew down a total3 of EUR 48 million of unsecured consumer from other financial institutions, which represents a decline of 26% year-on-year.

The average interest rate on these new drawdowns was 8.7% in the second quarter of 2024, as opposed to 9.3% in the same period a year earlier. The majority of unsecured consumer credit is linked to Euribor rates.

At the end of the second quarter of 2024, the stock of Finnish households’ unsecured consumer credit from OFIs was EUR 467 million, and the average interest rate on the stock was 14.0%. A year earlier, the stock stood at EUR 555 million, with an average interest rate of 15.4%.

Unsecured consumer credit drawn down from OFIs accounted for an estimated 3% of the total stock of Finnish households’ unsecured consumer credit (excl. vehicle loans) at the end of the second quarter of 2024.

In recent years, foreign digital banks have become more prominent in the origination of consumer credit to households. The largest proportion (63%) of the estimated stock of households’ unsecured consumer credit was granted by credit institutions operating in Finland.