17.11.2022
Potentially 4,000 households will benefit from the Mortgage for Rent scheme, the government’s latest lifeline for distressed borrowers, to help them keep their homes, a Treasury Department official said.
Speaking to state radio CyBC, Treasury Department permanent secretary George Panteli said 3,000 to 4,000 problem borrowers would be included in the new government scheme.
He said the scheme is currently under the oversight of the European Commission’s Directorate General for Competition (GDA) and will be submitted to the House of Representatives before the end of the year.
Panteli said the process in Brussels is nearly complete with his assessment: “GDA technocrats are mostly asking technical questions related to home values and debt asset swap agreements between banking institutions and borrowers.
“The government’s goal is to reach as many vulnerable households as possible.”
The beneficiaries will be people from low-income groups and retirees, whether or not they have applied for the ESTIA program.
The program will also include borrowers who defaulted on their mortgage but had their application for ESTIA or other schemes rejected because they were classified as non-viable due to their low income.
The plan is for KEDIPES, the state-owned asset management company, to purchase the mortgage-linked property for between 50% and 60% of its 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.
This will entail a 15-year payment duration, while borrowers can submit a property purchase offer after five years.
The value of the house must not exceed 250,000 euros.
Initially, Nicosia was preparing a mortgage-to-rent scheme to cover overdue loans secured by basic housing and SME premises for up to €350,000. In June, however, Brussels rejected it, demanding that the scheme only apply to borrowers with homes worth less than €250,000.
The GDA also rejected government plans to expand the scheme to cover loans secured by major businesses.
According to the original concept, the contract value of the scheme is 3 billion euros.
