The Finance Minister of Cyprus, Makis Keravnos, has written letters to the Director General of the Cyprus Banks Association and the Director General of the Association of Credit Acquisition Companies and Credit Facility Managers, requesting measures to control rising lending rates for serviceable loans up to €350,000.
In his letter to the Director General of the Cyprus Banks Association, Mr. Keravnos acknowledged the banking sector's important role in the economy and society and stressed the Ministry's position to maintain the soundness of the Cyprus banking sector. He highlighted the issue of inflation and the continuous increase in interest rates by the European Central Bank, leading to financial problems for the middle class, particularly those looking to buy or construct their first homes.
Following constructive consultations with the banks and the Cyprus Banks Association, the Minister proposed that the banks could absorb some of the increase in lending rates, with minimal impact on the banks themselves. He specified that this proposal should only concern serviceable housing loans for the purpose of building or buying a first home, with a maximum value of €350,000 and whose interest rate is variable.
Mr. Keravnos believes that a positive response from the banks to this proposal will relieve many households and significantly maintain the quality of the banks' portfolios. He also expects an immediate positive response from the banks.
In his letter to the General Manager of the Association of Credit Acquisition Companies and Credit Facility Managers, the Finance Minister noted that the continuous increase in prime rates has led to a significant increase in most floating lending rates, causing concerns for the financial strength and solvency of borrowers, particularly those with serviced loans secured by their main residence with a market value of up to €350,000.
The Minister proposed the introduction of plans to freeze interest rates at the current level or to return interest on serviced loans secured by the main residence. He believes that such plans would have no real cost to the credit recovery companies but only temporarily reduced revenues and profits. In the long term, they would be beneficial for the companies themselves, helping borrowers keep the loan serviced and acting as a reward to the cooperative borrowers who have come to their creditors to find a sustainable restructuring.
Mr. Keravnos hopes for a study and a positive response to his proposal from the Association's members.
[With information from CNA]
