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Hellenic Bank has followed its Cyprus peers and announced on Thursday it will cut its base interest rate by 1 percentage point as of March 1, after the Central Bank decided to lower its ceiling on deposit rate by 1% on Monday.
Hellenic Bank said in an announcement that the reduction applies to all performing and non-performing loans with the base rate reduced from 5.25% to 4.25%, the business loans rate from 4.25% to 3.25%, the business overdraft base rate from 4.25% to 3.35%, the housing loans base rate from 3.65% to 2.65% and for housing loans linked to older rates from 4.50% to 3.50%.
The interest rate on all credit cards will also be reduced by 1% from the current rate of 13% for most cards.
The bank added that the reduction in interest rates “will automatically cause either a reduction of the loan repayment instalments or shorten the repayment period, without any need for additional procedures, in accordance to the customers’ loan agreements.”
Hellenic Bank CEO Bert Pijls had said earlier that the bank had gradually reduced its deposit rates a month ago, starting from 3% for new loans to businesses.
On Monday, the Central Bank of Cyprus said that its governing council decided to lower the ceiling on its base interest rate by one percentage point, urging the island’s commercial banks to follow suit by cutting lending rates and help spur money supply and economic activity as interest rates in Cyprus are the most expensive in the Eurozone at 2% higher than the rest.
The banks were quick to respond saying they would go ahead with rate reductions as of March 1.
Last Friday, the Co-operative Central Bank (CCB) jumped the gun when it announced it will cut interest rates on well-performing housing loans by 1 point from 5.2% to 4.2% as of March 1, affecting about 34,000 households retrospectively.
The Co-operative added, however, that the reduction will only affect mortgages that are being serviced. Non-performing loans (NPLs) it added, will receive a 0.5% interest rate cut only after these are restructured and begin to be serviced, while the remaining 0.5% rate cut will kick in retrospectively after the loan emerges from the NPL status, usually 90 days after regular payments.
The CCB also announced last month that it would cut interest rates on agricultural loans by 2% on average and a reduction in lending rates on student loans back in 2014.
Bank of Cyprus issued an announcement on Monday saying it, too, will lower the base rate by 1 point from 5% to 4% from March 1 for all new and existing loans, with a seamless reduction in monthly instalments and loan balances that will affect some 180,000 accounts held by 94,000 clients, for a benefit to the consumer of about €57.4 mln.
As regards NPLs that are restructured, these will benefit from a 2% gain once they enter the performing level, i.e. 90 days after the last regular repayment. The Bank of Cyprus said it base rate for housing loans is reduced from 3.25% to 2.25% and for business loans from 4% to 3%.
