Chrysostomos Tsoufis

The repeated interest rate hikes carried out by the ECB since last July have left their mark by “putting the brakes” on would-be borrowers, at least as far as mortgages are concerned.

According to its financial stability report Bank of Greece2022 – with the exception of the first quarter – saw a decline in mortgage demand due to a general increase in interest rates and a deterioration in consumer confidence despite the fact that the outlook for the real estate market has improved and continues to improve.

Somehow – even though there was an increased demand for consumer loans – the rate of lending remained negative in 2022 and the first 3 months of this year. And all despite the fact that, as reported by the central bank, the banks relaxed a little the criteria by which they decide who to lend to.

The processing of the data on loans to natural persons, freelancers or sole proprietorships secured by residential real estate (i.e. they are given with a mortgage on a property used as a residence and can be housing, consumer, repair) shows that 14,074 such loan contracts were concluded and a total of €1.1 billion was disbursed, 42% more than in the year 2021 – when the economy was also closed – but much lower than the level before the global financial crisis.

The Chamber of Commerce screened these loan contracts and found that 71.4% of them can be classified in the low-risk group, i.e. they have been signed with borrowers who have sufficient income and satisfactory ability to service it. 27.5% are classified as medium risk and only 1.1% are high risk loans. Based on this analysis, the Central Bank concludes that Greek banks are currently following prudent lending practices.

Almost all loans of this type – 97% – are intended for the purchase of real estate for private residence. 3% are earmarked for the purchase of rental properties. 2 out of 3 loans have an initial fixed rate period that exceeds 10 years so that there is more protection for the borrower against interest rate increases.

The average loan term is 23 years.

Most – 4 out of 10 – are between 15 and 25 years and only 5% have a duration of more than 30 years.

Of course, 95% of these loans were given by the 4 systemic banks. The amount of the loan on average amounted to 63% of the value of the property at the time of issuance.

1/4 loans were less than or equal to 50% of the property value and 9/10 were less than or equal to 80% of the property value. In the 4th quarter of the year, an average loan secured by a residential property was €82,700.