Serbia’s household credit market recorded strong growth in the second quarter of 2026, with mortgage lending approaching a 20% annual expansion rate as a government-supported programme for younger borrowers generated a substantial share of new housing credit. Household borrowing increased by RSD 95 billion in Q2 2026. Housing loans accounted for RSD 30.5 billion of the increase, while cash loans contributed RSD 51.2 billion.
Loans issued through the youth programme represented slightly more than 40% of the quarterly increase in mortgage lending, making the scheme a significant component of the latest expansion in housing finance. By June, housing loans were 19.0% higher year on year. Across all household loan categories, new lending reached RSD 311.2 billion in Q2, up 15% from the corresponding period of 2025.
Mortgage Growth Continues Despite Higher Rates
The increase in housing credit is taking place with borrowing costs still substantially above the exceptionally low interest-rate conditions seen in the early 2020s. The average rate on the dominant euro-indexed housing loans was approximately 4.5% in June. At the same time, household incomes continued to increase, supporting borrowers’ capacity to absorb higher financing costs.
Average net wages increased by more than 10% in nominal terms, while real wages rose by around 7%. The government-backed youth mortgage programme is also reducing financial barriers for younger borrowers seeking to enter the housing market, adding a policy component to the expansion in mortgage demand.
Mortgage Demand Supports Residential Construction
The increase in housing finance is extending beyond bank balance sheets into residential construction activity. Residential construction is expected to support the construction sector through 2026–2028, alongside transport and public infrastructure projects. Greater mortgage availability is strengthening developer demand while large state-backed projects are simultaneously competing for construction labour and materials.
Supply-side costs have already increased. Prices of construction materials and components were 10.8% higher year on year in June, while construction activity expanded by approximately 9%. The combination of stronger housing demand and rising construction costs is therefore occurring alongside continued growth in overall construction activity.
Household Credit Quality Remains Strong
The acceleration in mortgage lending has not been accompanied by a deterioration in household credit quality. The household non-performing loan ratio stood at 2.6%, while banks broadly maintained unchanged household lending standards during the second quarter.The structure of household lending is also becoming more heavily weighted toward the domestic currency. Dinar-denominated loans accounted for 56.9% of household lending, the highest share recorded. The housing-credit expansion is consequently taking place alongside rising wages, policy-supported mortgage lending, faster household borrowing and higher costs for construction materials and capacity.
