The acceleration of credit expansion rates in retail banking is a central bet of credit institutions for the coming years. After a 15-year straight decline in mortgage balances, their managements estimate that from 2025 the trends will reverse, offering an additional source of interest income, as to date the bulk of new loan production has come from businesses. According to an analyst who monitors the sector, both in the current business plans for the period 2024-2026 and in the forecasts for the three years 2025-2027, which will be presented by the bank administrations at the beginning of next year, the strengthening of loans to households for financing their basic needs, such as buying a home, will be a prerequisite for achieving profitability goals.
The trigger
According to the same sources, the trigger for the return of specific grants to the focus of their banking operations will be the activation of the new state program “Spiti My”, which will also be addressed to older candidates, up to 50 years old, against the limit of the 39 years that applied during the first cycle of the action. In this way, it is estimated that around 30,000 households that meet certain income and asset criteria will receive cheap financing, possibly 75% interest-free, to acquire their own home.
For now, however, the mortgage market remains weak. And this is because the majority of transactions in the real estate market, about 70%, are done with cash. Although new disbursements have gradually picked up since 2016 as the macroeconomic environment has improved, confidence has recovered and banks have been restructured following the 2015 fiasco, performance remains a long way from the 2000s.
Reversal of trends
Moreover, the momentum that had developed was halted in 2022 due to the tightening of monetary policy and the rise of interest rates to the highest levels since the creation of the eurozone. The reversal of the trends again, bank executives estimate, presupposes the maintenance of growth rates of the Greek economy above 2%, but also the de-escalation of the cost of money. As they explain, “the reduction of the intervention indicators of the ECB, which has already started, but also the further improvement of the rating of the Greek banks by the international rating agencies will allow the provision of cheaper loans to the real economy”. They estimate that these two conditions will be met in the coming year, paving the way for an increase in financing to households. The liquidity and capital ratios, after all, allow the further opening of the cannula, which for now has only been achieved in business credit.
The strategy
But this does not mean that credit institutions are sitting idly by until the cost of money falls. On the one hand, in recent months they have been continuously reducing the interest rates they offer on loans, both housing and consumer. Their offers also include exemption from application fees or rewards through card reward systems.
On the other hand, they attempt to approach those who insist on using their deposits to finance their needs. In this direction, they have launched preferential loan programs with cash collateral, which ensure very low costs. Through these the borrowers, keeping their movable property intact, get very cheap liquidity for any purpose.
The advantage
For example, recently a systemic group launched a mortgage loan without a real estate note, but with a deposit guarantee. Its advantage is that the borrower’s money during the commitment period earns interest, yielding an annual income, while the lending process is completed faster and at a lower cost as the pre-notification of the property is avoided. In this way, a significant percentage of the financing costs is covered and the total wealth of the customer increases.
At the same time, banks have launched preferential programs in consumer credit secured by cash or real estate. A typical example is the recent creation of a new loan from a large bank with a fixed interest rate of 4.5% for the entire repayment period for amounts up to 100,000 euros.
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