Loans

Banks are expecting a decrease in demand for business loans, especially from small and medium-sized enterprises, in the second quarter of the year, as a result of the rise in interest rates and the increase in the cost of money, which discourages borrowing.

Lenders may have been inundated with applications from young people regarding the My Home housing program, but that does not necessarily translate into numerous loan disbursements.

Nonperforming loans in Cyprus rose by 12.8 million euros in January 2023 compared with December 2022, amounting to €2.32 billion or 9.5% of total loans.

According to data released on Thursday by the Central Bank of Cyprus (CBC), total loans in January 2023 amounted to €24.3 billion, €24.36 billion lower than in December 2022. Provisions against NPLs amounted to 47.2% in January 2023.

More than 14,000 applications from young people and young couples have already been submitted for My Home, a new program of cheap loans for acquiring a first residence, with an interest rate corresponding to a quarter of the normal market interest rate.

After pretending to hire a group of unemployed people with high wages in contract companies, an illegal gang that have taken loans on behalf of the victims have made a profit of 500 million Turkish Liras ($25.8 million).

Eurobank, Piraeus and Alpha Bank have announced that they will be keeping mortgage installments at their current levels for 12 months. As pledged by the first two banks, the baseline rates of serviced mortgage loans will remain at the levels they were on March 31, 2023, minus 20 basis points, for 12 months, starting in May. National Bank is expected to follow suit.

Banks are stopping any further rises in mortgage rates, freezing interest rates at a date reportedly set for March 31.

This means that any increases made after last Friday or due to be made from now on in the interest rates that form the basis of reference for housing loans will not be applied.

The Finance Ministry of Cyprus has stressed the importance of having stable legislation regulating out-of-court auctions in tandem with an effective insolvency framework in order to achieve a reduction of bad loans.

The National Assembly has passed a law designed to reduce the impact of the annual increase in the minimum wage on households' creditworthiness after the latest increase rendered much of the population ineligible for a mortgage.

The collapse of Silicon Valley Bank and the serious problems facing Credit Suisse will not have wider consequences for the European banking system, according to Greek bankers.