Borrowers of variable rate mortgages will now be shielded from any new interest rate hikes by the European Central Bank (ECB), and in any case they will also see their installments reduced, according to consistent borrower reward programs that have begun to be announced by both systemic banks – Piraeus Bank, National Bank, Alpha Bank and Eurobank – as well as smaller commercial banks as well as cooperative banks.

Similar programs were also announced by the loan management companies, with the estimations of an umbrella of protection for approximately 400,000 borrowers.

The goal of the reward programs is in any case to reduce the current interest rates of variable rate mortgages and at the same time to protect the borrowers from possible future increases in the benchmark rates. Borrowers will of course benefit fully if, over the 12-month period, benchmark rates are reduced by the Central Banks to levels lower than those envisaged in the reward schemes.

As announced, the reward program does not include fixed interest rate mortgages or mortgages whose interest rate is set based on the Basic Mortgage Interest Rate, as these are not affected by the change in interbank reference rates.

Borrowers who fall within the scope of application of the reward programs will automatically join the program announced by each bank without requiring any action on their part. The update on the reduced interest rate of the loan and the reduced installment will be made through the May account copies and will concern the June installment.

The new consistent borrower reward programs announced by the banks follow on from the Vulnerable Households Mortgage Installment Subsidy Program (Vulnerable Program) announced in February. With this specific program, 50% of the increase in the monthly mortgage installment is subsidized with a reference date of 30/6/2022 and for a period of 12 months. The period of availability of the specific program is extended until 31/7/2023 (date until which applications can be submitted), while the first subsidies are expected to be given in April. Finally, the issuance of a ministerial decision (KYA) is expected soon, which will increase the relevant income and asset criteria by 30% (only for the purposes of the specific program), significantly expanding the scope of beneficiaries.

Freeze on floating rates – What has been announced

Consistent borrower reward programs announced by each bank separately apply to all those paying off a variable rate mortgage or repair loan.
But they have some key points in common. The new interest rate will be at the interbank reference rate, as it was set on 31/3/2023, reduced by approximately 20 basis points, with this rate remaining constant throughout the 12-month period. Unless in the context of monetary policy the benchmark interest rate is reduced to lower levels. For loans based on one-month Euribor, the interest rate stabilizes at 2.70%, while for those based on three-month Euribor it is set at 2.83% – 2.85%.

As announced, a necessary condition for joining the program is for the loan to be fully informed, while the loan must have been disbursed by 21.12.2022 at the latest. The program will benefit natural persons repaying a mortgage loan, regardless of whether it is a first residence or not.

Up-to-date mortgages also include loans that have been settled recently, provided that the borrower does not owe any installments.

Also included are all mortgages in a currency other than Euro, as well as at a different interest rate than Euribor (e.g. Swiss Franc and/or Libor, MRO EKT, etc.).

In their separate announcements, the banks point out that the new initiative is part of the institutional dialogue with the State, confirming their support for the country’s households by rewarding consistent borrowers and at the same time supporting their vulnerable customers, assuming the costs of the reward programs themselves.

For his part, the Minister of Finance Christos Staikouras in his statements stated among other things that “the Government proves in practice that it listens to the real problems of the citizens and intervenes in a coordinated and decisive manner, in cooperation with the banking system and the competent supervisory authorities, inside and outside of Greece, in order to effectively support households and businesses in dealing with the extraordinary difficulties of the current period, due to the exercise of a more restrictive monetary policy by the European Central Bank”.

“The financial system must, without creating a problem in its stability, exhaust the possibilities of supporting, strengthening and rewarding borrowers, taking into account the conditions that are formed in their daily life, the margins they have and the supervisory rules”, said the minister, among other things .

Initiatives to freeze interest rates on informed mortgage loans and by the Management Companies

With their announcement, the Loan and Credit Claims Management Companies state that they have decided to formulate appropriate programs in the near future with the aim of freezing the floating base interest rates, for informed mortgage loans of private borrowers (natural persons). The above programs will come into force no later than 02.05.2023 and will be valid for twelve (12) months. The specific initiatives, as stated in the announcement, will be specialized by loan portfolio and are aimed at providing assistance to consistent borrowers who may be facing difficulties repaying their respective debts due to rising interest rates.

With a common goal of helping borrowers, each Management Company will formulate the conditions and criteria for belonging to the respective program, in accordance with its procedures and policies. Borrowers (natural persons) with informed variable rate mortgages will automatically be included in the above favorable programs, without requiring any action on their part. For more details, each borrower can contact the Management Company they work with.

Regardless of the above initiative, the Management Companies, as they point out in their announcement, provide an additional number of settlement possibilities to any debtor who wishes to settle his debt on sustainable terms. For the first half of 2023, the Management Companies have set the goal of loan arrangements and arrangements to reach 3.2 billion euros, increased by more than 30% compared to the same period in 2022.