Stable interest rate duration of at least 5 years was chosen by about 8 out of 10 borrowers (78% rate) who proceeded to purchase a house through loan in 2022, the percentage of those who chose the long-term interest rate, i.e., was high at 63%. over 10 years by choosing a long-term commitment amid the uncertainty created by conservation inflation.

The remaining percentage of borrowers, i.e. 22% (about 2 out of 10), “remained” in the floating interest rate solution, the average level of which is currently at about the same level compared to the fixed interest rate (10-year, for example, between 3.80%-4, 30%), but these borrowers do not “enjoy” protection from further interest rate hikes in the future. It should be noted that the 3-month euribor, which is the basis for commercial banks’ floating interest rates, is currently 3.4% and will rise to just above 3.8% in autumn, an estimated at least two increases from the ECB.

In total in 2022, according to the details published on Bank of Greece Financial Stability Report, the mortgage market strengthened by 42%, and the issuance of loans secured by residential real estate amounted to 1.1 billion euros. Despite strong growth, the Bank of England notes, disbursement remains low both in absolute terms and relative to the level of mortgage lending before the global financial crisis in 2008, when in 2005-2007. the annual flow of mortgage loans was 12 billion euros on average.

The number of loan agreements signed in 2022 was 14,074, and the majority of disbursements (96.9%) are for the purchase of residential property for the owner’s residence, and only 3.1% are for loans for the purchase of residential property for rent. The average term of a loan is 23 years, while 19.7% of new loan agreements have a term of up to 15 years, 40.1% – from 15 to 25 years, 35.2% – from 25 to 30 years and the remaining 5% – over 30 years.

The average cost of the loan to the value of the property (loan to value – LTV-O) at the time of signing the contract was 63%, and it is assumed that the total value of the property financed by the bank loan was just over 1.7 billion euros. Specifically, based on data analysis, 27.2% of payouts granted had a corresponding LTV of up to 50%, i.e. covered half the value of the property, and 91.7% of the payments figure up to 80%. This means that approximately 20% of the value of the acquired property was covered by the borrowers’ own funds.

Limiting the loan-to-value ratio is a macro-level precaution to avoid over-borrowing. According to the Bank of Greece, 19 EU member states use it. and ranges from 80% to 90%, that is, an initial payment of 10% to 20% of the property value is required. Three countries allow loans covering 100% of the value of collateral. These are Luxembourg when the loan concerns the purchase of a first home, Portugal if the property is owned by a financial institution, and the Netherlands for all home loans secured by residential real estate in its territory. On the contrary, some Member States impose stricter limits (70%-75%) on loans secured by real estate that is not used by the borrower as the main residence or is not bought for the purpose of renting out (purchasing property for the purpose of renting out). Cyprus, for example, imposes a 50 percent credit-to-value cap on luxury homes purchased by real estate investment firms, and Hungary on foreign currency loans to borrowers without foreign exchange hedging.

This limit is combined with the Debt Servicing-to-Income Index (DSTI) limit and is considered by the Bank of England to be the most popular option among macroprudential measures of debt burden, with the third most common measure being the borrowing duration cap. The debt-to-income ratio limit has been set by 11 countries at 40% to 50%, while only four member states (France, Netherlands, Hungary, Romania) choose stricter limits, 35% or lower. . In our country, this limit, as new payments show, is 32%. Cyprus provides the least restrictive limit of 80% for loans to individuals secured by real estate that is the primary or secondary residence of the borrower. It should be noted that the debt service-to-income ratio is calculated based on the borrower’s disposable income (after taxes and mandatory social security contributions) and is parameterized based on interest rate sensitivity analysis.