12.10.2022
Soaring inflation threatens to reverse the upward trend in home loans from Cypriot banks over the past two years as interest rates rise.
Bank of Cyprus officials say high inflation is forcing households to struggle to make ends meet, eventually putting off buying their own home.
With inflationary pressures and rising costs of living eating into household incomes, the number of new mortgages is the highest since December 2014, when the central bank began recording data.
New net mortgage loans were €693.6 million in the first eight months of 2022, compared to €520.2 million in the eight months of 2021, €306.3 million in 2020 and €454.3 million in 2019.
“There is a slight decline in mortgage lending, which appears to be driven by inflationary trends, rising cost of living, and recent increases in interest rates.”
A spokesman for Hellenic Bank said: “While demand for mortgages remains at a relatively high level, we are seeing a slight decrease in demand compared to last year.
“Mainly due to a sharp and severe increase in the cost of building materials, a reduction in disposable income and a slight increase in interest rates on new loans.”
Five-year mortgage interest rates were 2.22% in August, compared to 2.04% in August 2021 and 2.33% in 2019, according to the latest data from the Central Bank.
Banks offer financing up to 80% of the cost of a loan for a first home with a repayment period of up to 35 years. It is also possible to suspend the payment of installments twice a year. Banks also give loans for home renovations.
Financing up to 80% is offered for first home renovations and 70% for vacation home renovations and land purchases.
Banks also lend for the purchase of land for immediate construction with 50% financing and up to 15 years. They also offer financing for the purchase of a second home.
A home loan can cover up to 70% of the purchase price of a property to purchase a second home for a period of 25 years.
According to the Central Bank, housing loans to residents of Cyprus reached 8.66 billion euros in August against 8.65 billion euros in July, 8.21 billion euros in August 2021 and 8.52 billion euros in 2019.
