Difference between interest rates loans and deposits are declining significantly, mainly after the recent increase in interest rates on new term deposits by Greek banks. This is what she claims in her statement Hellenic Banking Association (HBA)pointing out that “the divergence between Greece and the eurozone is limited both by interest rates on new term deposits and spread, although the cost of borrowing in the capital markets for Greek banks is much higher than in other countries. “.

Bank analysis

EET focuses its analysis “on the margin of the total cost of new retail borrowings in relation to new retail term deposits with an agreed maturity of more than 1 year”, which, as it says, “was the same as in March 2023 between Greece and Eurozone average (+0.75%)”. Based on this comparison, the EET analysis recommends convergence of interest rates on term deposits and narrowing the gap with lending rateswhich is contrary to its methodology Bank of Greece compare lending and deposit rates based on the weighted average rate across all categories.

The Bank’s analysis also takes into account the interest rate on savings accounts, which is very low compared to the interest rate on time deposits. According to EET, “to the interest rates of new loans and deposits, as well as to the spread between them, the Central Bank (like the ECB) includes the cost of all first-demand deposits (savings and demand deposits). Demand deposits, due to their characteristics, have a very low price throughout Europe, almost close to 0%.

Moreover, according to EET’s reasoning, “their partial conversion into term deposits began only a few months ago and is still ongoing both in Greece and in the Eurozone.” As he notes, for the month of April, based on the data of the Bank of Greece, “the weighted average interest rate on new deposits is 0.25%, i.е. 4 basis points below the weighted average interest rate on all existing deposits (0.29%). . However, the average rate of new term deposits per month is above 1%.

Thus, in the current environment of increased intervention rates by the ECB, the increase in the spread between new loans and deposits, which is fully in line with the trends in the euro area, is strongly influenced by the current rate on demand deposits, which should not be accepted. take this calculation into account.

New interest rates

EET states that “the data that needs to be monitored to understand pricing trends and compare them with the rest of the Eurozone is the new interest rates offered on loans to individuals and businesses compared to the new interest rates offered on term deposits.” .

For household term deposits up to 1 year, the interest rate in Greece was 1.22% (versus 1.16% in March 2023) and 1.87% (versus 1.47% in March 2023). For terms over 1 year in Greece, the interest rate has risen to 1.71%. On average in the Eurozone, fixed-term deposits of individuals for a period of more than 1 year amounted to 2.29%. Especially for the member states of Southern Europe, EET notes that “there are some peculiarities in relation to other countries. l.g. in Spain, the interest rate on time deposits of individuals with a term of up to one year was 1.33%, and in Portugal – 0.95%. For term deposits over a year, interest rates reached 1.64% and 1.24% for Spain and Portugal, respectively.”

In terms of new loans and a focus on 5- to 10-year mortgages, the rate rose 16 basis points to 3.66% in April. In the Eurozone, the average interest rate for the same mortgage category was 3.51%, compared to 1.77% a year ago (April 2022). The interest rate on general household loans rose by 10 basis points in April in Greece to 3.88%, and in the Eurozone it increased by 4 basis points to 3.48% from 1.61% a year ago (April 2022 of the year).

What does EET mean?

It ranks 14th with an interest rate of 3.53% for 1 to 5 year fixed rate mortgages.

The main conclusion about the spread between interest rates on new loans and new term deposits based on the EET analysis is as follows:

• The spread is narrowing significantly, mainly following the recent increase in interest rates on new term deposits by the Greek banking system.

• The divergence between Greece and the Eurozone is limited both in the interest rates of new term deposits and in the spread, even though the cost of borrowing in the capital markets for Greek banks is much higher than in other countries.

• In April 2023, for the first time since January 2022, the margin of new home mortgages relative to new retail term deposits with an agreed duration of more than 1 year was lower in Greece (1.7%). compared to the Eurozone average of 2.2%.

• In April 2023, the total cost margin of new retail borrowings against new retail term deposits with agreed maturities greater than 1 year was the same as in March 2023 between Greece and the euro area average (+0 .75% ).

However, regardless of the basis for comparing the evolution of spreads (i.e., should it be based on the weighted average interest rate on all deposits or only on the interest rate on term deposits), comparison with other countries in the Eurozone shows that Greece is among the most expensive countries with terms of lending rates. At the same time, it is also the country with the lowest credit rating, which burdens the cost of borrowing not only for the state, but also for the private sector. Greece, among others, is:

• 4th place among the cheapest with an interest rate of 1.22% for term deposits of the population with a fixed duration of up to 1 year.

• 4th place among the most expensive with an interest rate of 12.79% on consumer loans to the population with a fixed interest rate of up to 1 year.

• 14th place with an interest rate of 3.53% in terms of mortgage loans with a fixed interest rate from 1 to 5 years.

• 11th place with an interest rate of 3.7% in terms of mortgage loans with a fixed interest rate from 5 to 10 years.

• 1st most expensive with an interest rate of 5.69% in terms of business loans.