By Chrysostomos Tsoufis

Christos Staikouras is waiting for the proposals of the banks on what they intend to do in order to shield the borrowers against the successive interest rate increases in the coming days.

In his almost weekly contacts with the heads of the banks, the Ministry of Finance has made it clear that while at the moment – and despite the six interest rate hikes to which the ECB has joined since last July, there is no increase in bad loans – but the risk of a new generation of non-performing loans is visible. And that’s because Frankfurt is announcing that not even the shocks to the markets from the problems in the banking sector will deter it and it will continue to raise interest rates until inflation is tamed and retreats to the 2% range.

In the Ministry of Finance, they are waiting for the next moves of the banks, estimating that 2 are the large pools of borrowers that may be “hit”:

The first has to do with housing loans, which in the vast majority have a floating interest rate (concern for consumer loans is small because they are usually linked to a fixed interest rate as emphasized by Nikis). It is typical that for a €100,000 mortgage with a repayment term of 20 years, the installment in June was €560. Now, after the sixth increase, it has risen to €720.

Therefore we are talking about an increase in the burden by €160/month or €1,920/year. Christos Staikouras in all his public interventions talks about loan arrangements that must be made which will be sustainable and he talks about the obligation of the banks to offer even more “rational” arrangements to those who had arranged their loans and went out of arrangement due to increases.

The second has to do with those who want to get a loan but when they get to the counter, they see the interest rates and make a change. Here it is clear that the Ministry of Finance is concerned about credit expansion – which boosts the rate of growth – and ideally they would like the banks to intervene in the issue of interest rates on new loans so that they remain attractive.

At the same time – albeit with obstacles – banks are setting up the platform to subsidize vulnerable borrowers with 50% of the increase in their installments caused by interest rate hikes. In the above example, since the borrower belongs to the unsecured, his bank will undertake to pay €80 of the €160/month, thus dropping the monthly installment from €720 to €640. So far, just over 800 applications have been approved. But around 26,000 remain unfinalized and the banks have already started personal communication with these borrowers – 1/3 of whom do not even have an email – in order to finalize the applications so that they can start receiving the subsidy from April.

In addition, things seem to be speeding up with regard to the arrangements of the extrajudicial mechanism. According to the data so far, more than 4,200 debtors have settled their entire debt – to the public and banks -, approximately 350 settle according to the Ministry of Finance every 15 days.

In the context of the new out-of-court settlement law, banks and servicers have announced the reasons why they refuse the arrangements proposed by the automatic platform, so now debtors have a complete picture and can know in advance whether their application will be accepted. The aim is of course to drastically reduce the percentage of rejections which last year reached 80%