09.01.2023
Brussels is talking about the approval of the “mortgage-rent” scheme for problem borrowers, calling on the Cypriot authorities to create a company to manage this scheme.
The European Commission’s Directorate General for Competition has instructed the Ministry of Finance to speed up the procedures for setting up a company managing the mortgage-rent scheme. The EU would like the state to run the scheme to increase transparency and access for oversight bodies in Brussels. Sources in the Ministry of Finance said they agree with the Commission.
The mortgage-rent scheme is the government’s last resort for some 4,000 distressed borrowers. The cost of the scheme was estimated at 400 million euros.
KEDIPES plans to purchase mortgage-related properties at prices ranging from 50% to 60% of their current value. Thus, the debtors will retain possession of the property, but not its ownership. In return, outstanding debt will be written off. Borrowers will then be given the option to stay on the property by paying a rent of 2% or 3% of its market value. The rent will be adjusted annually based on a formula to be determined, and borrowers will be able to receive government assistance in the event of any increase they cannot meet. The scheme has a 15-year repayment period, while borrowers can submit a property purchase offer after five years. The value of the house must not exceed 250,000 euros.
Nicosia is trying to persuade the authorities to provide flexibility so that borrowers with up to €350,000 in mortgages secured by their home approved for other schemes will switch to a mortgage-to-rent plan.
The Finance Ministry intends to launch the scheme before the government’s term expires in February.
The mortgage-to-rent scheme will cover a loan portfolio of 3 billion euros, of which approximately 1.5 billion euros are already managed by KEDIPES.
