BoC rewards points for mortgage payers

1 min read

Bank of Cyprus has a reward plan to compensate borrowers consistent with their mortgage instalments even though affected by rising interest rates by the European Central Bank.

Phileleftheros daily said BoC would announce the reward scheme through which borrowers will earn bonus points on their credit cards, which they can redeem at retail stores.

The news overturns a previous BoC decision to launch a reward scheme that gives borrowers a ‘cash return’ on instalments paid, as the bank’s CEO Panicos Nicolaou announced.

Instead of cash, reliable borrowers will get reward bonuses, which they can redeem through their cards.

The plan has been finalised after the necessary approvals given by the European Stability Mechanism (SSM) of the ECB and is expected to be made public very soon.

According to banking sources, due to the size of the Bank of Cyprus loan portfolio – the largest in the market – any decision to return money in cash would be characterised as loan restructuring.

As sources claimed, the bank sought other solutions to compensate consistent borrowers.

The Bank of Cyprus award points to borrowers with mortgages of up to €350,000, linked to the base interest rate of the ECB or Euribor.

The plan concerns approximately 20,000 Bank of Cyprus customers with a total mortgage balance of €1.5 bln.

Through the plan, it is expected that €4 mln worth of points will be awarded.

The point distribution scheme will start at the end of the year, and until then, the mortgage should be paid off normally.

According to Phileleftheros, the scheme is based on the formula 0.50 × 6/12 and lasts six months.

For an up-to-date mortgage loan balance of €100,000, the reward points will be 250.

Customers are expected to be informed by messages or through the 1bank service that their card has received the reward points allocated to them from the balance of their mortgage and can be redeemed.

The news comes as Finance Minister Makis Keravnos urged Cypriot banks to alleviate the cost-of-living squeeze on households by absorbing shocks from interest hikes introduced by the ECB.

The ECB raised interest rates by another 25 basis points in mid-June, signalling more to come as it significantly revised its core inflation forecasts.

It was the eighth time the ECB increased interest rates from July 27, 2022, pushing its key rate up by a cumulative 375 basis points, with the deposit rate reaching 3.5% and the main refinancing rate of 4%.

Keravnos repeatedly urged the banks to lower mortgages with floating interest rates and increase deposit rates.

Average interest rates for mortgages in Cyprus is 4.45% compared to the 4.03% Eurozone average.

The average deposit rate for households stands at 2.27% in the Eurozone and 0.73% in Cyprus, highlighting once again that Cypriot depositors are among the most disadvantaged in the EU.