Piraeus Bank started announcements of banks on the program of “freezing” mortgage installments loans for 12 months. As Piraeus announced, informed mortgage base interest rates will remain at the level they were on March 31, 2023, minus 20 percentage points, for 12 months.

Meanwhile, the participation of funds in the program to set the ceiling on the increase in the interest rate on housing loans is being promoted by the government in cooperation with the management companies of the “red loan”.

The measure was discussed yesterday at a meeting of the Association of Loan and Credit Management Companies (EEDADP), whose members reportedly supported extending the measure to mortgage portfolios managed by servicers on behalf of funds that bought back securitized loans. These are €21.4 billion worth of mortgages that have been taken over by funds through successive securitizations and divestments in recent years.

These include loans under the Katseli law, which are part of securitized portfolios, most of which are regulated based on court decisions, as well as loans outside the Katseli law, which were already unprofitable and were transferred. These loans, to the extent that they were already problem loans, are hardly serviced by their debtors, and the increase in interest rates has significantly worsened the financial situation of borrowers. The inclusion of these mortgages in the capping scheme will put a cap on further rate hikes based on a freeze that will be enacted with a target date of March 31 and for up to 12 months.

What did Piraeus Bank announce?

According to the relevant message from Piraeus, the program concerns informed mortgage loans to individuals that have already been paid on 12/31/22 and will be implemented from the beginning of May 2023. by 20 percentage points and maintain at this level for 12 months from May 2023 to April 2024.

Depending on the base interest rate and currency of the loan, the base interest rates of the new program plus the margin stipulated in the relevant loan agreements (including the contribution of Law 128/75) will be formed accordingly. For example, at Piraeus Bank, where mortgage rates are primarily based on 1-month Euribor, the base rate ceiling for informed mortgages in this category is set at 12 months at 2.72% from 2.92% as of 31/03/23.

The corresponding base rate adjustment will also apply to informed mortgages in other currencies or with different base rates.

Individual borrowers with current variable rate mortgages will automatically join the new 12-month program without any action on their part.

400,000 mortgages

The program is expected to cover about 400,000 home loans, according to banks, and that number is expected to increase exponentially if loans sold to funds are included in the program.

The programs implemented by management companies provide for the possibility of a fixed installment plan for those borrowers who cannot pay increased installments due to an increase in interest rates, which are offered with interest capitalization during the remaining loan term. It should be noted that management companies are more able to accept more flexible repayment schedules to the extent that they are not subject to SSM’s strict capital maintenance rules.

The widespread use of these programs is also due to the continuation of their smooth service, despite the increase in the value of money last year and the jump in installments to 2,500 euros on average per year with a loan of 100,000 years and repayment. term of 30 years.

Where will the ceiling fit?

It should be noted that according to servicers, red mortgages are regulated with an average margin (spread) of 2.5%, and therefore, after the increase in interest rates, the interest rate on which they are charged is now close to 5.5%. Setting a cap on the base rate would freeze rates at that level, preventing further increases, which were factored in by the ECB at its next meetings by a total of 50 basis points, which would drag out the 3-month Euribor, at which most loans are valued at floating interest rates.

Source: moneyreview.gr