Macroeconomic policy geared towards stabilising inflation, as well as a sound institutional and legal framework, has initiated higher economic growth in central and eastern Europe (CEE) and south-east (SEE) Europe. Inflation rates have reached single-digit levels (see table 1) – except in Serbia with 17.7% and Russia with 10.9%. With average gross domestic product (GDP) growth of 6%, the whole region outpaced western Europe by 2-3 percentage points. The resulting rising income of households has become one of the main drivers for prosperous banking markets. Since 1989, living standards have increased by nearly 40%. To benefit from this trend, many banks have moved into mortgage lending.
Although all the region’s mortgage markets have been developing rapidly, progress within the markets differs, breaking down into two groups of countries (see chart 1): the first encompasses all the new EU member states of central Europe (including Croatia). The second consists of the Balkans and Russia.
