Minister urges banks to contain mortgage rates

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Finance Minister, Makis Keravnos, has asked the Association of Cyprus Banks and the Credit Acquiring Companies for measures to contain rising interest rates for loans up to €350,000 or borrowers will be unable to pay.

In his letter to the Director General of the Association of Cyprus Banks, Keravnos said the Finance Ministry recognised the banking sector’s important role and wanted to safeguard the sector’s soundness.

He said all European countries as Cyprus, face a serious problem due to inflation and, consequently, the continuous increase of interest rates by the European Central Bank.

“Due to these developments, serious financial problems are created mainly for the middle class and especially for those who borrow to build or buy their first home, something that concerns mostly young couples.”

Keravnos argued that banks could absorb part of the increase in borrowing rates with a bare minimum impact on them.

He explained that this should concern only performing mortgages that were taken to build or buy the first home of up to €350,000 at current market prices and for which a floating rate applies.

“A positive response of the banks to this issue will relieve many households and maintain to a significant level the quality of the banks’ portfolio.”

In another letter to the Director General of the Credit Acquiring Companies / Credit Servicers Association, the finance minister said the continuous increase of the basic interest rates has led to a significant rise of floating lending rates, causing concerns about the economic resilience and reliability of borrowers.

“I consider that you should examine the introduction of schemes with the aim of maintaining interest rates where they are now or returning interests for performing loans using the first home as a collateral worth up to €350,000”.

Keravnos said such schemes would have no real cost for the Credit Acquiring Companies, which will have temporarily reduced income and profits, adding that borrowers will be facilitated to continue paying their loans.