Borrowers of variable rate mortgages will now be protected from any new European Central Bank (ECB) interest rate hikes, and in any case they will also see their installments cut, according to the successive borrower reward programs that both sides have begun to announce. systemic banks – Piraeus Bank, National Bank, Alfa Bank and Eurobank – as well as smaller commercial banks, as well as cooperative banks.

Similar programs have also been announced by credit management companies, with estimates suggesting protection for approximately 400,000 borrowers.

The purpose of the incentive programs in any case is to reduce current interest rates on variable rate mortgages and at the same time protect borrowers from possible future increases in base rates. Borrowers will, of course, benefit fully if, over a 12-month period, central banks cut base rates to levels below those provided for in the reward schemes.

As announced, the reward program does not include fixed-rate mortgages or mortgages that are priced based on the base mortgage interest rate, as they are not affected by changes in interbank reference rates.

Borrowers eligible for incentive programs automatically join the program announced by each bank without any action on their part. The updated information on the reduced interest rate on the loan and the reduced payment will be made using copies of the May invoice and will refer to the June payment.

The new successive borrower incentive programs announced by banks are a continuation of the Vulnerable Household Mortgage Subsidy Program (Vulnerable Population Program) announced in February. This specific program subsidizes a 50% increase in the monthly payment of a mortgage loan with an initial date of 06/30/2022 and a term of 12 months. The availability period for a specific program has been extended until 07/31/2023 (the date until which applications can be submitted), and the first subsidies are expected in April. Finally, a ministerial decision (KYA) is expected to be issued shortly, which will increase the relevant income and wealth criteria by 30% (only for the purposes of a specific program), which will significantly expand the circle of beneficiaries.

Floating rate freeze – what was announced

Consistent reward programs for borrowers, announced by each bank separately, apply to all those who repay an adjustable rate mortgage or a loan for repairs.

But they do have some key points in common. The new interest rate will be equal to the interbank reference rate set on March 31, 2023, reduced by approximately 20 basis points, and this rate will remain unchanged over a 12-month period. Unless, in the context of monetary policy, the base interest rate is reduced to lower levels. For loans based on a one-month Euribor, the interest rate will stabilize at 2.70%, while for loans based on a three-month Euribor it is set at 2.83% – 2.85%.

As announced, a prerequisite for joining the program is full knowledge of the loan, and the loan must be repaid no later than 12/21/2022. The program will benefit individuals making mortgage payments, whether it is their first residence or not.

Current mortgages also include loans that have been repaid recently, provided that the borrower has no payments.

Also included are all mortgages in a currency other than the euro and with an interest rate other than the Euribor (eg Swiss franc and/or Libor, MRO EKT, etc.).

In separate statements, the banks note that the new initiative is part of an institutional dialogue with the government, reaffirming its support for the country’s households by rewarding successive borrowers, while at the same time supporting its vulnerable customers by bearing the cost of rewards. the programs themselves.

For its part, Finance Minister Christos Staikouras, in his statements, stated, among other things, that “the government proves in practice that it listens to the real problems of citizens and intervenes in a coordinated and decisive manner, in cooperation with the banking system and the competent supervisory authorities inside and outside Greece to effectively support households and businesses in overcoming the extraordinary difficulties of the current period due to the implementation of a more restrictive monetary policy by the European Central Bank”. .

“The financial system should, without creating problems in its stability, exhaust the possibilities of supporting, strengthening and rewarding borrowers, taking into account the conditions that develop in their daily lives, their margins and supervisory rules,” the message says. Minister, by the way.

Interest Freeze Initiatives

In a statement, the Loan and Claims Management Companies state that they have decided in the near future to develop appropriate programs to freeze floating base interest rates for informed mortgage loans to private borrowers (individuals). The above programs come into force no later than 05/02/2023 and will be valid for 12 (twelve) months. The specific initiatives, as outlined in the announcement, will be portfolio specific and aim to assist regular borrowers who may find it difficult to repay their respective debts due to rising interest rates.

With the overall goal of assisting borrowers, each Management Company will set out the conditions and criteria for membership in the relevant program in accordance with its procedures and policies. Borrowers (individuals) with informed variable rate mortgages will be automatically included in the above preferential programs, without any action on their part. For more detailed information, each borrower can contact the management company with which he works.

Notwithstanding the foregoing initiative, the Management Companies, as they note in their statement, are providing an additional range of settlement options to any debtor wishing to repay their debt on acceptable terms. For the first half of 2023, the management companies have set a goal for loan agreements and arrangements to reach 3.2 billion euros, which is more than 30% more than in the same period in 2022.

MONKEY BEE