An increase in the €100,000 mortgage loan installment from €160 to €240 per month, depending on the term of the loan and the margin applied by each bank, resulted in increase in the key interest rate of the European Central Bankwhich tightened uribor at 2.5% over the past seven months, which is a significant burden for them family budget but also the cost of doing business, and with all estimates converging on a further 50 bps increase at the next ECB meeting in early March, this will be reflected daily in the Euribor, leading to a consistent increase in the coming months as well. .

3-month euroboron

It is estimated that the 3-month euribor, which is the basis for calculating floating rate loans, will remain at a high level and, in particular, close to 3.5% during 2023, consolidating increased payments on all categories of existing loans. According to the same estimates, the first cuts will start in 2024, namely from the end of the first quarter onwards, but they will be moderate and the euribor is projected to be close to 2.7% at the end of 2024 and 2.5% in 2025 year.

Based on these projections, the total cost mortgage loan this would be around EUR 200–300 for an existing loan of EUR 100,000 with a term of 20 or 30 years and a spread of 2.5% or 3.5% respectively. These are loans that were issued in the previous decade with floating interest rates, not those that were issued before 2008 and which, because they are serviced normally, have largely repaid interest and now only repay principal. Accordingly, for a small business loan, for example. 200,000 euros, 10 years maturity and a spread of 5.5% (final interest rate 8% today), the total load compared to last July is already around 300 euros per month and continues to grow.

The upward trend in all categories of new loans with a focus – except mortgages – and business loans, which are also directly linked to the Euribor, is confirmed by the data on the dynamics of interest rates in December published by the Bank of Greece yesterday. .

In March, another rate hike is coming – the first cuts should begin from the end of the first quarter of 2024, but they will be modest.

Enterprises

As can be seen from the relevant data, the average interest rate on a loan up to EUR 250,000 jumped from 5.76% in October 2022 to 6.14% in December, and for amounts up to EUR 1 million, the average interest rate increased from 4.64% in October to 5.14% in December. The average cost of borrowing for large companies and loans above €1 million rose to high levels of 4.49%, despite the activation of the Recovery Fund and containment spreads from the side banksto speed up new loan payments. Bank of Greece data raised the average cost of borrowing for SMEs with regular maturities in December to 4.83% from 4.42% in October, while the average cost of revolving loans rose from 4.79% in October to 5.21% in October. end of the year.

Reduction of new housing

Banks have kept attractive fixed rates on new mortgages and, in some cases, lowered floating spreads to support demand. However, as data from the Bank of England shows, uncertainty on the interest rate and inflation front has already weighed on demand, which has declined substantially in the last two quarters of 2022, stalling the pace of growth in previous quarters. Bank-specific data indicate that in the second half of 2022, i.e. after the first ECB interest rate hike in early July, new home loan applications were down 12.4% compared to the first half of 2022 and 6.4% compared to the second half of 2021.

The decline in mortgage demand is even more pronounced in the last quarter of 2022, as market applications fell by 20.4% compared to the last quarter of 2021 and by 5.7% compared to the third quarter of 2022.

Deposit rates

Moderate growth in interest rates on time deposits is evidenced by data from the Bank of Greece, which, as it turned out, slightly increased to 0.33% in December, while the increase was more on the existing balance sheets of companies, whose average interest rate reached 0.73%. In reality, the increase is higher to the extent that the rate of return on time deposits is in most cases subject to negotiation between the bank and the depositor and is not always reflected in official price lists. According to banks, the yield on time deposits for six months or more has been trending upward in recent months, with yields for 12 months or more reaching levels above 1%, depending on the bank and the amount of the term. deposit. Banks have also launched stepped deposit products that reach terms of up to 24 months, providing maximum quarterly returns with an interest rate of up to 1.80%-2%, but at the end of the period. On an annualized basis, the yield is slightly above 1.20%.