Hercules 3 to come with stricter regulations

The National Economy and Finance Ministry’s plan for “Hercules 3” provides for additional guarantees to banks amounting to €2 billion, and for its extension until the end of 2024.

The aim is to include in the mechanism of bad-loan management at least three more securitizations of loans pending from the four systemic banks, as well as the securitizations of smaller banks, such as of Attica Bank and Pancreta Bank.

The criteria of Hercules 3 will be stricter compared to the first and the second version, as the senior notes, which will be guaranteed by the state and will have to secure a higher investment category – i.e. more chances of collection.

Original Story: Ekathimerini | Evgenia Tzortzi 
Photo: Photo by Sergey Klimkin in FreeImages
Edition: Prime Yield

Greece tables draft legislation expanding “Hercules” program to reduce NPL

The Greek government has just tabled in Parliament a draft law seeking to further reduce non-performing loans (NPL) in banks’ portfolios by expanding the “Hercules” programme.

The draft legislation envisages measures to introduce greater transparency, more information and respect of debtors’ rights for servicers, modernise an out-of-court mechanism and expand protection for vulnerable debtors, improving the operating framework of a sale and leaseback agency, introducing measures to boost competition, such as loan offering from non-banking agencies, and expanding transactions through the IRIS system.

National Economy and Finance Minister Costis Hatzidakis said that the government’s intervention for banks and loans combined the goal of financial restructuring and the protection of vulnerable debtors with a series of modern and fair solutions. Servicers will operate under new and stricter transparency rules, ensuring debtors are given more information. The out-of-court mechanism becomes simpler, while the expansion of the Hercules programme will operate for the benefit of the banking system. At the same time, competition in the banking system becomes more intense through initiatives such as the ability of non-banking agencies to offer housing and business loans. The Greek economy has proven to be resilient and will move even higher in 2024, while dealing with the outstanding private debt will definitely contribute towards this direction, he said.

The expanded Hercules programme, following an agreement reached with the European Commission, will have a guarantee offer ceiling of up to €2 billion and will last until December 31, 2024. The Greek state has offered guarantees worth €18.7 billion in the previous two phases of the programme, helping to reduce the stock of NPL held by banks from 40.6% in December 2019 to 8.6% in June 2023.

Original Story: Hellenic News of America |HNA
Photo: Photo by Jonte Remos in FreeImages
 Prime Yield

Bank of Portugal imposes capital buffer for mortgages at four large banks

The Bank of Portugal has told Millennium bcp, Novo Banco, Banco BPI and the local unit of Spain’s Santander, to create a new capital buffer equivalent to 4% of their loan portfolios that are collateralised by home mortgages.

It said in a statement the measure addressing “sectoral systemic risk” would come into effect on Oct. 1, 2024, and be reviewed at least every two years.

“This instrument has a preventative nature and aims to increase the resilience of institutions in the face of a potential future materialisation of systemic risk in the residential real estate market in Portugal,” it said.

The central bank said the four banks, which account for 61% of total home loans, were using internal ratings-based approach to calculate risk-weighted assets, which leads to lower evaluations than those of banks using the standard method.

BPI is owned by Spain’s Caixabank and Novo Banco by the U.S. fund Lone Star.

According to central bank data, all lenders in Portugal brought total non-performing loans (NPLs) down to €9.69 billion, or 3.1% of total credit, in June from the peak of 17.9% in June 2016.

The NPL ratio of loans to individuals was just 2.4% in June, despite rising interest rates and high inflation.

Original Story: Reuters |Staff
Photo: Bank of Portugal headquarters
Edition: Prime Yield

Housing costs in Greece are the highest in Europe

Greece has a negative lead in Europe on the income-housing costs ratio, with 27% of the Greek population spending more than 40% of their disposable income to cover housing costs. November’s Financial Stability Report by the Bank of Greece (BoG) attributed the country’s position to its low per capita income compared to the rest of Europe. 

According to the report, Greece also ranked first in terms of housing costs. The figures, reported by Nafteboriki, show that:

– Apartment prices (in nominal terms) rose by 13.9% in the second quarter of 2023, year-on-year, compared to an increase of 11.8% in 2022.
– Prices of new apartments (up to 5 years old) increased at an average annual rate of 13.8%, in the second quarter of 2023, while prices of old apartments rose by 14.1%.
– In terms of geographic region, the prices in the country’s major urban centers rose significantly and more specifically in Thessaloniki (16.4%) and other major cities (14.6%), which exceeded the corresponding average growth rate for the entire country.

In the short term, foreign investment interest will persist, especially in privileged locations in the Attica basin and tourist areas. According to the BoG, expectations for the Greek residential real estate market remain positive, despite the uncertainties in the domestic and global economy.

Original Story: Ekathimerini |Staff 
Photo: Photo by Takis Kolokotronis in FreeImages
Edition: Prime Yield

Brazil’s PIX a threat to credit cards, but a boon for banks

The market for credit cards and debit cards is going to get smaller in Brazil, as PIX, the country’s instant payment system, expands its reach and features. 

Launched in November 2020 by the Brazilian Central Bank (BCB) to foster competition in financial services, PIX became so popular that, by the end of last year, 77% of the Brazilian population had used it. 

The central bank is also studying new functionalities such as PIX International and PIX Automatico, with the latter to be launched next year to facilitate recurring payments.

While credit cards are growing alongside electronic payment systems in the country, they are losing ground to PIX. 

The first quarter of this year was the first where the number of PIX transactions surpassed those made with credit and debit cards combined. PIX transactions for the first quarter of 2023 totalled 8.1 billion, versus 4.2 billion credit card and 3.8 billion debit card transactions, according to BCB data. 

Challenges for card networks

PIX Garantido, also known as PIX Credit, another modality in the making, could represent the coup de grâce for credit cards as it will enable payments by instalment without the use of one.

This makes the solution especially attractive for the segments of the population that cannot afford credit cards. 

“Brazil is on the verge of a potential revolution in payments as people will no longer need credit cards to do instalment purchases,” says Carlos Scharfstein, partner at Stocche Forbes Advogados.

“When you use a credit card, you are paying fees to at least three service providers. PIX is a system created by the government that is free and that can do the same thing. It means that credit card companies and related businesses, such as credit card machine readers [so-called ‘POS machines’] may suffer and will have to reinvent their business model. And if you take a look at the stock market, you’ll see how the companies that rely very heavily on the use of credit cards are suffering,” says Mr Scharfstein.

Therefore, “MasterCard and Visa are presenting themselves more and more as technology companies instead of credit card networks”, Mr Scharfstein remarks.

Despite this, it seems card schemes do not realise what is happening, “because they’re increasing fees and coming up with new ones”,  says Ralf Germer, CEO and co-founder of payments platform PagBrasil.

PIX makes banks stronger

Banks have proved to be more resilient to PIX’s success despite initial woes. 

When PIX was launched, Brazil’s banks worried about losing all of their revenues from transfers. “But now, most payments go through banks,” says Mr Germer. 

For instalment purchases, the banks where the PIX key for the transaction is registered will guarantee the payout to the merchant in advance. As a result, lenders charge fees to merchants in exchange, to cover the risk. This means PIX Credit will bring additional revenue streams from payments to banks, says Mr Germer.

The larger revenue stream of banks doesn’t come from the use of credit cards, but rather credit itself, explains Mr Scharfstein.

A lot of challenger banks and neobanks in Brazil — such as BS2, Neon, Original, Next and Nubank — among others, started with the belief that they could build a sustainable business model by only offering credit and debit cards to low-income customers. 

After four or five years, they came to the conclusion that such a proposition was not feasible, Mr Scharfstein adds, and they either changed their business model or broadened their services to rely more heavily on credit and other services not related to payments. 

Meanwhile, some banks have already leveraged the open-source technology of PIX to release their own versions of PIX credit, which are often referred to as PIX Parcelado: literally “PIX in instalments”.

Original Story: The Banker | Barbara Pianese 
Photo:Deposit Photos
Edition: Prime Yield

Greece gets €1.07 billion from the sale of 22% of the National Bank

Greece has secured revenues of €1.066 billion from the disposal of 22% of National Bank, a process oversubscribed eight times.

As Minister of National Economy and Finance Kostis Hatzidakis underlined, this is the “most successful transaction in the last three years in the EU in terms of the demand manifested and the minimization of the discount on the offering price,” set at €5.30 per share from a provisional price range of €5-5.44. Demand for the HFSF shares at National exceeded all expectations, reaching 9.5 times for the international book and 2.2 times for the Greek book. The shares immediately attracted very strong interest from leading international institutional investors, with a total of more than €30 trillion of funds under management.

As the HFSF bank bailout fund noted, “several of them have included a Greek bank in their portfolio for the first time, or again after many years.”

The participation of long-term investors covered more than half of the demand and according to data from the share allocation, among the big investment houses taking positions in National Bank are Fidelity, BlackRock, Capital, Allianz and Lazard.

The president of the HFSF, Andreas Verykios, thanked the international and Greek investment public “for the high response to the public offer,” which, as the managing director of the HFSF, Ilias Xirouhakis, stated, is “a resounding vote of confidence from the markets in the prospects of the Greek financial system and the growing dynamics of the Greek economy.”

At the same time, “it is recognition at an international level of the fund’s contribution to the recovery of the banking sector and to the consolidation of a climate of investment confidence in our country.”

That was also acknowledged by Bank of Greece Governor Yannis Stournaras, who contacted the management of HFSF, and those of National and Alpha, whom he congratulated for the successful moves in the privatization of the two banks. In total, from the two privatizations, of National and Alpha, the state will collect €1.36 billion.

Original Story: Ekathimerini | Evgenia Tzortzi 
Photo: Photo by Michalis Famelis / Wikimedia Commons
 Prime Yield

Lower-income households suffer twice as many mortgage delinquencies as richer households

Mortgage delinquency remains contained, despite the brutal rise in the Euribor caused by the European Central Bank (ECB) raising official interest rates to combat high inflation. Home-purchase loans, the Bank of Spain reminds, are the last thing people stop paying: they dip into savings and benefits and do not stop paying the instalments for two years on average after they have suffered a significant drop in income, usually due to job loss. This explains why NPLs are at low levels in historical comparison, far from the peak of 6.28% in March 2014, despite rising slightly from 2.33% of the mortgage balance in March to 2.44% in June. But this reality hides notable differences: lower-income households have twice as high a default rate as wealthier families.

According to data from the Bank of Spain, the 20% of households with the lowest gross income (less than 26,695.09 euros per year) recorded a fall in their mortgage delinquency from 3.69% in December 2021 (when the ECB began to tighten monetary policy) to 3.27% last June. But despite the decline, they have a default rate that is double that of the 20% of households with the highest income (more than 40,775.85 euros per year), in which it fell from 1.99% to 1.63%. The data thus confirm the intuitive fact that the lower the income, the more payment difficulties: 3.12% of households with an annual income of between 26,695.09 and 30,735.5 euros, 2.86% of households with an annual income of between 30,735.5 and 34,728.27 euros, and 2.44% of households with an annual income of between 34,728.27 and 40,775.85 euros are in arrears.

All groups of families have seen their average monthly mortgage repayments rise by between 19% and 21% from the end of 2021 to last June, from 453 to 542 euros in the case of the lowest incomes and from 716 to 869 euros in the case of the highest incomes. However, the impact of these increases on family finances has been uneven depending on their economic level. Mortgage repayments have gone from absorbing 23.22% of the gross income of the lowest-income households in December 2021 to 26.23% last June, while in the wealthiest families the rise has been from 17.14% to 19.66%. In other words, it is confirmed that the richer the household, the more margin it has to meet the rest of its expenses once the mortgage has been paid.


The data also show that the weight of mortgage payments in the income of all groups of households is below the threshold considered “prudent” (less than 30%). The Bank of Spain has not detected “alarm signals” in this variable across the board. However, as this is an average, it implies that there are families with mortgages above this level. And bearing in mind that households with lower incomes are those with a rate closer to the barrier (26.23% compared to 30%), it is foreseeable that in this group there is a greater number of families in a more vulnerable financial situation and with a higher risk of defaulting. 

Another indicator in the same direction: the 40% of lower-income households only account for around 11% of the total balance of mortgage loans, due to their lower access to loans because of their lower level of savings to pay the down payment (banks normally require the buyer to contribute 20% of the value of the property), as well as the lower price of the properties they can afford to buy. However, their weight in the nearly 11,000 million euros of doubtful mortgages (defaults of more than 90 days or other subjective characteristics that make non-payment likely) is 16%, higher than what would correspond to them according to their weight in total credit.

This greater financial weakness makes low-income households more vulnerable to the “expected deterioration in credit quality” (i.e. an increase in non-performing loans) that the Bank of Spain foresees. In its recent financial stability report, it noted that the “favourable evolution of the labour market and economic activity, together with moderating inflation, has translated into a notable recovery in household incomes in the first half of the year”. This is what explains why mortgage delinquency has continued to fall. However, it also warned that, although the average mortgage balance rate has already risen from 1.1% at the end of 2021 to 3.5% in September, “a greater pass-through of the increase in (benchmark) interest rates to the cost of households’ outstanding debt is to be expected, which would contribute to an increase in the proportion of indebted households with a high financial burden”.

The institution estimated that just under a third of variable-rate mortgages still have to face a revision of more than one percentage point (plus the differential fixed in the contracts) between June 2023 and June 2024. And it warned that a rise of five percentage points in the Euribor (somewhat higher than that recorded since December 2021), fully passed on to credit, could increase the number of indebted households in a vulnerable situation (interest payments exceeding 40% of income) to represent 14.6% of the total (1.63 million families).

Original Story: Activos |Pablo Allendesalazar 
Photo: Photo by Blues57 in FreeImages
Translation: Prime Yield

BCP puts a €80 million NPL and REO portfolio for sale

The sale is part of the bank’s normalisation plan, which had profits of €650.7 million by September.

BCP has put a new portfolio of problematic assets on the market with a book value of €80 million, according to Eco.

The “Grace project” includes around €64 million in guaranteed non-performing loans (NPL) and €15 million euros in real estate assets (REO), according to sources contacted by the newspaper.

The sale is part of the bank’s normalisation plan, which had profits of €651 million by September.

The aim is to cleanse the balance sheet of problematic assets. The digital newspaper explains that in September BCP had €790 million in NPL and a further €1.23 billion in non-performing assets (NPE), a reduction of almost €400 million year-on-year, partly due to the sale of the ECS funds at the end of 2022, a portfolio of luxury hotels and other properties.

The NPE ratio fell from 3.7% to 3%, and the chairman, Miguel Maya, ruled out any problem with a systemic dimension in a context of rising interest rates.

Original Story: Jornal de Negócios |Negócios 
Photo: Millennium bcp website
Edition and translation: Prime Yield

Caixa’s default rate is the lowest among large banks thanks to Desenrola programme

Caixa’s default rate fell to 2.59% in October, from 2.67% in September. According to the institution, it reached the lowest level among the country’s big banks. The drop was greater, of 0.24 percentage points, compared to August, when the index reached 2.83%.

According to the bank’s vice-president of risk, Henriete Bernabé, one of the factors behind the drop is Desenrola Brasil. She said in a statement that the programme encouraged customers to seek out Caixa to renegotiate debts, regardless of whether they fit the Desenrola criteria or not.

She also says that the bank’s own renegotiation programmes, such as Tudo em Dia, and the evolution of collection processes have also influenced the movement. “Caixa has very attractive conditions for renegotiating defaulted loans in general. Discounts can reach 95 per cent,” he adds.

According to the bank, the total credit portfolio closed October at R$1.1 trillion, with more than R$700 billion in property loans.

According to Caixa, the reduction in the delinquency rate is despite the fact that credit has continued to be granted, which is different to the market trend. The institution said that it “endeavours to offer credit with conditions suited to the client’s profile and with the best market rates. This favours default,” according to Henriete.

Caixa’s expectation is that the default rate will continue to fall. For the vice-president, the trend for 2024 is positive.

“Considering the expectation of a reduction in the Selic rate, added to the control of the inflation index, the reduction in the unemployment rate and also a possible increase in jobs with the direct and indirect generation of jobs, through the Minha Casa Minha Vida and Novo PAC programmes, an improvement in families’ financial conditions is expected,” she said in the note.

Original Story: Valor Investe | Staff
Photo: Caixa building
Edition and translation: Prime Yield

Bank’s NPL ratio remains at 3.56% in September

The nonperforming loans (NPLs) ratio of Spanish banks to the private sector remained at 3.56% in September, unchanged from the previous month, according to the lates data published by the Bank of Spain (BdE).

The ratio stood at 3.50% in June and July, before rising by 6 basis points in August, which it maintained in September. However, it is still below the 3.79% reached a year ago, in September 2022. In monetary terms, doubtful loans amounted to €42.081 billion, the third lowest figure of the year.

This figure has been on a downward trend so far in 2023, as it closed last year at €43.159 billion and has not reached the €43 billion mark since. This year’s low was recorded in July, at €41.754 billion.

Looking at the breakdown by type of business, financial institutions (banks, savings banks and credit cooperatives) reached a NPL ratio of 3.44% in September, after a decrease of 1 basis point in the last month. A year earlier, the ratio was 3.70%.

As for financial credit institutions, NPL reached 6.74% of the total, up from 6.47% in August and 6.29% in September 2022.

Original Story: Ecobolsa | News
Photo by Xexo_Xeperti in FreeImages
Edition and translation: Prime Yield

IMF advises banks in Portugal to ‘cushion’ bad loans with profit growth

The International Monetary Fund (IMF) is advising Portuguese banks to avoid ploughing all of their rising profits into dividends, instead calling for a strengthening of capital reserves as a “cushion” against a possible rise in bad debts and bankruptcies.

“Banks need to be capitalised, including Portuguese banks, and we suggest that in the current phase banks increase their own funds and capital reserves and refrain, as far as possible, from paying out all of the increase in profits in dividends,” said the IMF’s European director, Alfred Kammer, at a meeting with European journalists in Brussels.

At a time when banks such as BCP, Novobanco, Santander Totta and BPI have almost doubled their profits in the first nine months of the year compared to the same period last year, the IMF’s regional director warns that “times are going to get tougher” and that “additional buffers” are needed.

“As a result of the post-pandemic adjustment, we’re going to see an increase in bankruptcies, we’re going to see an increase in non-performing loans, and that’s all over Europe, it’s not a specific problem for Portugal,” he adds.

According to Alfred Kammer, this is a “normal” situation given the tight monetary policy with high interest rates, now stabilised by the European Central Bank, which is making access to finance more difficult and causing families and companies to pay more for their loans, especially housing loans.

“These upside risks are normal, […] but we also advise the Portuguese authorities to increase their systemic capital reserves to prepare for an increase in non-performing loans and bankruptcies,” he adds.

He warns that “as financial conditions tighten, financial tensions may emerge”, so “countries should closely monitor banks’ credit quality, leverage and liquidity risks, and increase capital reserves”.

The Regional Economic Outlook for Europe states that “although the European banking system has high levels of solvency and liquidity, banks in some countries hold substantial securities that could lead to a significant depletion of their own funds”.

This is the case in Portugal, which has one of the highest levels of variable-rate mortgages in Europe.

Nevertheless, Alfred Kammer is optimistic about the Portuguese economy, noting that “Portugal has had strong growth, reflecting the recovery in tourism” and also “efforts” to combat unemployment and invest in education.

“I think this is also reflected in our positive forecast for Portugal,” he adds, alluding to the fact that Portugal’s figures are better than those of the eurozone.

“Portugal has been very determined in the last three years to create buffers […] and that is certainly reflected in the positive assessment for Portugal and that makes us generally optimistic for growth in Portugal in the medium term, but of course in the short term it is suffering at the same time a slowdown in Europe […] and that is also reflected in our figures,” says Alfred Kammer.

The IMF expects the Portuguese economy to grow by 2.3 per cent this year and 1.5 per cent in 2024, with inflation falling to 5.3 per cent in 2023 and 3.4 per cent in 2024.

Original Story: CNN Portugal | Lusa /AM
Photo: IMF – Facebook
Translation and edition: Prime Yield

Greece to sell Alpha Bank Stake to UniCredit

Greece is pressing ahead with a plan to sell its stakes in the country’s banks, in a sign the financial industry is returning to normal after a decade-long debt crisis.

The country’s Hellenic Financial Stability Fund has agreed to sell a 9% stake in Alpha Bank to UniCredit SpA. It is also starting a process to divest a 20% holding in National Bank of Greece, a lender of which it owns about 40%. 

The HFSF, a bank bailout fund that holds the government’s stakes, has said it wants to exit all holdings in the country’s lenders by the end of 2025. It also owns stakes in Piraeus Bank and Attica Bank.

The move comes after Greece regained its investment grade credit rating at firms including S&P Global Ratings after more than a decade. At the same time, the country’s lenders have significantly cut the amount of bad loans accumulated during the debt crisis, which shaved around a quarter off the country’s GDP. Non-performing loans (NPL) now make up 5.7% of the credit portfolio of Greece’s biggest banks combined, down from 33% three years ago. 

The sales announced now follow the divestment from Eurobank Ergasias Services and Holdings SA last month, with the lender repurchasing the shares from state.

Original Story: BNN Bloomberg | Sotiris Nikas and Paul Tugwell 
Photo: Alpha Bank website
Edition: Prime Yield

Marathon puts its toxic assets in Spain up for sale: €1.2 billion from Santander and Ibercaja

The opportunistic fund decided to reduce its exposure to the country following the closure of a fund. It had bought corporate loans with real estate exposure.

The Marathon fund, one of the largest opportunistic investors, wants to get rid of a large part of its assets in Spain. This investor has given a sale mandate to Alantra to transfer all the problem loans and real estate assets it has bought in recent years, valued at more than €1.2 billion, according to financial sources consulted by this newspaper.

Original Story: El Confidencial | Jorge Zuloaga 
Photo: Ibercaja – Facebook
Edition and translation: Prime Yield

Survey shows that 13% of Brazilian can’t pay basic bills

Research carried out by Serasa and Flexpag on the profile of profile of Brazilian indebtedness in 2023 shows that 13 per cent of people in debt in Brazil are unable to pay basic bills such as bills such as electricity, water or gas. Eight out of ten have reduced their consumption of these services, which appear among the three biggest expenses for another year, accounting for 24 per cent of the household budget, behind supermarkets (34 per cent in recent years and 33 per cent in the last 12 months) and credit cards (with 26 per cent and 29 per cent respectively), respectively).

In the online survey carried out in October, in partnership with the Opinion Box research institute, 11,541 people aged 18 and over were interviewed who are included in Serasa’s database of defaulters throughout Brazil. For 53 per cent of those interviewed, spending on basic bills takes up the biggest chunk of their monthly budget.

In 82% of cases, the value of the bills is up to R$750. Among those interviewed, 83% said they had already delayed other bills in order to prioritise paying for water, electricity or gas. A further 61 per cent have borrowed money from friends and family to pay a bill; 49 per cent have already taken out a loan and 45 per cent have had their supply cut off due to arrears.

Original Story: Canal Energia | Sueli Montenegro 
Photo:Photo by Cesar Fermino on FreeImages
Edition and translation: Prime Yield

Five contenders in the race for the bad debt deal of the year in Portugal

LX Partners has put €4.2 billion euros of non-performing loans (NPL) and the servicer Algebra up for sale. It’s the deal of the year in Portugal and there are five interested parties.

The NPL of the year in Portugal has attracted five bidders, according to information obtained by ECO from two market sources.

The consortium formed by Cerberus/Intrum/FS, Balbec, Carval, LCM and Bain has submitted non-binding proposals for the purchase of the €4.2 billion of problematic loans and the Algebra platform, which is also part of the deal.

LX Partners has put its entire NPL business in Portugal up for sale in a process codenamed “Projeto Cascais” and led by KPMG.

At stake are NPL that the fund has purchased from Portuguese banks in recent years. Out of a gross value of €4.2 billion, approximately €4 bilion are unsecured loans and another €200 million are secured loans. The deal also includes the servicer responsible for managing this portfolio, Algebra Capital.

LX Partners is an investor focused on distressed debt and NPLs, private equity and real estate. In Portugal, in addition to the NPL business, it owns Five Credit (a digital platform for alternative loans for SMEs), the management company Circle Capital and invested €125 million in Smart Studios (studios for students) in 2018.

The “Cascais Project” can be considered the biggest of this year, which has been marked by a strong cooling of the market. The few portfolios that have entered the market this year are small in value, rarely exceeding €100 million. One of the largest cases is that of Banco Montepio, which has a portfolio of distressed assets valued at around €230 million, including, among other things, ongoing debt and cash in court.

The main reason for this cooling is the “big clean-up” that the banks have carried out in recent years. Five years ago, the banking system was faced with €31.8 billion of NPLs, equivalent to 13.6% of total loans. By the end of June, the ratio had fallen to 3.1%, below the “magic number” of 5%, totalling €9.7 billion, according to the latest data from the Bank of Portugal. Net of write-downs, NPLs totalled €4.2 billion.

Original story: ECO |Alberto Teixeira
Photo: Hugo Humberto Plácido da Silva on FreeImages
Edition and translation: Prime Yield

New housing loans decline

Rising interest rates seriously hurt mortgage credit, affecting both the demand and supply for mortgages. This stems from the figures of the Bank of Greece, based on which mortgage disbursements fell in the second quarter of 2023 by 10.7%, while in the same period the number of loans granted showed a greater decline of 12.4%.

Loan disbursements fell from €270.3 million to €241.5 million, while the number of loan contracts signed was reduced from 3,535 to 3,097.

The picture at the six-month level is not particularly differentiated, as despite the marginal increase of 1.8% in disbursements to €507.8 million from €498.7 million in the first half of 2022, the number of housing contracts signed decreased marginally to 6,578 in the first half of 2023 from 6,596 in the corresponding period last year. 

As BoG notes in its recent financial stability report, disbursements remain low both in absolute terms and in comparison to the pre-global financial crisis level.

The decline in demand is a result of household anxiety over rising interest rates, which increase the cost of servicing their debt obligations, and rising house prices, which make it almost prohibitive to attract middle-income buyers.

The banks’ policy was not accompanied by a relaxation of credit criteria, which is confirmed by the fact that the weighted average loan-to-property ratio fell in the second quarter of the year to 61.4% from 63.1% in the corresponding period last year.

This means that those who resorted to borrowing to buy a home had available equity of 39.6% of the value of the property they purchased. Accordingly, the weighted average loan-to-income ratio stood at 3.5, indicating that the total amount of loans secured by residential real estate is almost 3.5 times higher than the annual disposable income of borrowers.

From the third quarter of the year, it is expected that the My Home program will have benefited the housing loan market, having gathered strong interest with the submission of approximately 40,000 applications since its introduction in April.

Original Story: Ekathimerini | Evgenia Tzortzi 
Photo: Photo by Svilen Milev in FreeImages
 Prime Yield