Cost of housing loans may increase

THE liquidity condition in the domestic and European market keeps the cost of deposits high, forcing banks to readjust their lending rates.

The ECB rate cuts are no longer popular in the domestic lending market, which still suffers from the uncertainty from the Greek crisis.

The changes in the interest rate policy of the banks affect the existing loans rather than the new since banks avoid new exposures to housing credit.

Even in cases that a household’s income is regarded as stable, banks are still hesitant, causing difficulties to the property market, where activity returned to pre-boom levels.

In the past six months, housing loans to Cyprus residents have showed stagnation to €12.2 billion.

Hesitation in granting new housing loans is more intense than that of 2009, when economy was in recession again.

Total housing loans to Cyprus residents in 2009 stood at €1.9 billion while in the first eleven months of 2011 they did not exceed €0.3 billion.

Avoiding new lendings, banks turned to the existing housing loans and started preparing their customers for new rate hikes.

“Due to the negative developments, we are forced to proceed with a new increase in the rate margins for loans allocated pursuant to the provisions of the relevant contracts”, a bank letter to customers said.

Similar moves are made by other banks with increases that might reach 55 base points.

Lending conditions will deteriorate in 2012 due to the capital challenges that the banks face.

Bankers expect that both offer and demand of housing credit will drop in 2012, intensifying pressures on the property market.

9 COMMENTS

  1. Funny how parliament and it’s members only pass laws that suit them, the €350 annual emergency tax on all businesses, joke totally unfair yet passed, small self employed person not making ends meet is taxed the same as the banks for example….nobody explains why though, it is just done.

  2. Denton Mackrell.

    I accept your challenge. What about:

    A parliament of MPs (Rooks. An optional ‘c’ could be inserted but I can’t for the life of me think where).

    A charm of developers (Goldfinches. Developers are ALWAYS charming. Well, aren’t they?).

    A covert of bankers (Coots. some say that bankers act covertly but I couldn’t possibly comment).

    A deceit of lawyers (Lapwings. No further comment required from me).

    A murder of all the above (Crows. Quite).

  3. @OOTFP. I’m trying to come up with suitable collective terms for the various ‘evil ones’:

    A bonfire of Cypriot lawyers? (as in bonfire of the vanities?)
    A delinquency of Cypriot developers?
    A corruption of Cypriot Ministers?
    An illegitimacy of Cypriot bankers?
    A lunacy of Cypriot estate agents?

    Any better suggestions anyone?

  4. @George, yup the only hope that the banks have in the future is to be bailed out using the funds from these resources that will ultimately end up in the gov. coffers, although I don’t see this happening fast…in the meantime if the bank sector goes bust Cyprus will end up going down the IMF path, not good either….

  5. George.

    I’m afraid the money’s gone, the bad guys having swindled everybody, and nobody’s going to invest any more.

    That’s the reality.

  6. I think its time to start getting those other gas/oil fields tendered/sold or whatever the term should be!
    And do something quick to kick-start the economy BUT this time don’t lend billions to fraudulent developers so they can finance their high living ways and hide money.

  7. I think I am qualified to answer Richards question .

    Fraud, lies, abuse, insults, threats, how to be corrupt. And that is just what they teach the lawyers. That is speaking from personal experience.

    They will get what they deserve and personally I hope some of them choke on it.

    Good health and good wishes to everyone else.

  8. All historic evidence points to raising interests in bleak economic times = deep deep prolonged recession & years of delays in economic re-growth.

    J Edgar Hoover?

    The Great Depression?

    Don’t they teach history in Cyprus?

    Actually – what DO they teach in Cyprus?

  9. So instead of the Banks pursuing the irresponsible Developers and sequestering their personal assets to help repay their non performing loans, which were irresponsibly extended to them by them in the first place, the Banks prefer to use the back door to reduce their loan book by penalising property owners who are diligently paying off their mortgage loans in a responsible manner.

    It also seems that innocent property owners will be paying for the irresponsible lending to Greece and the subsequent haircut to come.

    No wonder they won’t give us our Title Deeds so we can sell up and leave PDQ.

    We’re the cash cows now, or is it ATM’s?

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