“The Ministry of Finance considers that in this economic situation the banks could absorb to some extent part of the increase in lending rates” says Mr. Makis Keravnos
Taking measures to contain the rising lending rates for serviceable loans up to €350,000, the Minister of Finance, Makis Keraynos, requests in his letters to the General Manager of the Cyprus Banks Association and the General Manager of the Association of Credit Acquisition Companies and Credit Facility Management Companies.
In his letter to the Director General of the Cyprus Banks Association dated April 11, Mr. Keravnos states that the Ministry of Finance recognizes the important role played by the banking sector in the economy and society and that the position of the Ministry is to maintain and ensure soundness of the Cyprus banking sector.
He points out that all European countries, like Cyprus, are facing the serious problem of inflation and, consequently, the continuous increase in interest rates by the European Central Bank and as a consequence of these developments, serious financial problems are created mainly among the middle classes and especially among borrowers for building or buying a first home, which mostly concerns young couples.
“Following the above and the constructive consultations with the banks and the Cyprus Banks Association, the Ministry of Finance considers that in this economic situation the banks could absorb, to some extent, part of the increase in lending rates, compared to the last July 2022, with almost minimal impact on the banks themselves”, says the Minister of Finance.
He adds that “the reference to lending rates should only concern serviceable housing loans for the purpose of building or buying a first home, with a maximum value of €350,000 at today's market prices whose interest rate is variable”.
As the Minister of Finance points out, “the positive response of the banks in this matter will relieve a number of households and will significantly preserve the quality of the banks' portfolio”.
“I am also sure that it will contribute decisively to improving the image of the banks and will relieve any form of pressure and I look forward to your immediate positive response”, concludes the MINISTER.
Moreover, in his letter to the General Manager of the Association of Credit Acquisition Companies and Credit Facility Managers, dated April 13, the Minister of Finance states that “the continuous increase in prime rates has led to a significant increase in most floating lending rates, which causes concerns for the financial strength and solvency of the borrowers with the possible result of worsening the economic living conditions of housewives”. current level or in return of interest on serviced loans secured by the main residence of market value up to €350,000″, he notes.
He adds that “such plans would have no real cost to the companies credit buyback but only temporarily reduced revenues and profits. In the long term, I believe that they will also be beneficial for the companies themselves, since such an arrangement would on the one hand help the borrowers to keep the loan serviced and on the other hand would also act as a reward to the cooperative borrowers who have come to their creditors to find a sustainable restructuring” .
“I hope for a study and a positive response to the above proposal from your members”, he concludes.