Piraeus Bank, Eurobank and Alfa Bank announced a “freeze” of their contributions mortgage loans for 12 months. As the first two banks have announced, informed mortgage base 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.

Eurobank announcements

At the levels that were on March 31, 2023, reduced by about 20 basis points, the base rates of informed mortgage loans of the Eurobank are “frozen” for 12 months.

As indicated in the relevant message of the Bank, for the first interest period after February 05, 2023 (i.e., for the June tranche of 2023) and for a period of 12 months, the Remuneration Program for Loyal Borrowers (PROGRAM) is being implemented. The purpose of the PROGRAM is, firstly, to reduce current interest rates on mortgage loans with a floating interest rate, and secondly, to protect borrowers from a possible increase in base interest rates in the future. It is understood, the bank notes in a related statement, that borrowers would benefit fully if, over a 12-month period, central banks lowered base interest rates to levels lower than those provided for in the PROGRAM.

In particular, as mentioned above, the new interest rate with the PROGRAM data will be made taking into account the interbank reference rate set on 03/31/2023, reduced by approximately 20 basis points. This interest rate will remain unchanged over the 12-month period unless the base interest rate is reduced to lower levels as part of monetary policy.

Alfa-Bank announcement

As Alfa-Bank announced, base interest rates on mortgage loans are frozen for 12 months at the same level they were on March 31, 2023, minus about 20 percentage points.

Specifically, starting Tuesday, May 2, 2023, the Mortgage Loyalty Reward Program will be offered for 12 months. The base rate will be maintained constant throughout the duration of the Program.

It is noted that if during the 12-month period the base interest rates are reduced to levels below those provided for by the Program, the corresponding reductions will be calculated directly in the interest rates of their Clients, the Bank notes. The indicative interest rates of the Program are as follows: 1-month EURIBOR at 2.72% and 3-month EURIBOR at 2.83% from 2.92% and 3.03% respectively at the end of March.

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%. The base rate cap 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 delay the three-month Euribor, at which most loans are valued at floating interest rates.

Staikouras: Non-system banks are expected to move accordingly
“The program, which begins in early May, protects households from possible future interest rate increases, sets the base rate at a lower level from the end of March, includes informed mortgages in other currencies, has a twelve-month period, and works for the benefit of clients in the event reduction in interest rates. Appropriate initiatives are expected to be immediately taken by non-systemic banks, as well as loan and receivable managers,” Finance Minister Christos Staikouras said.

At the same time, it is recalled that the Ministry of Finance, in an effort to support the largest possible number of vulnerable informed citizens with mortgage loans, reached an agreement with the banking system of Greece and legally fixed the possibility of expanding income and property criteria by 30% for inclusion in the program of subsidizing mortgage loans in installments, in the amount of 50% of the interest rate increase, with a three-month extension, until 07/31/2023, the application deadline for the program.