Borrowers choose fixed rate mortgages

By Leonidas Stergiou

According to the provisional data of the banks, since the beginning of the year until today, mortgage loans of more than 300 million euros have been disbursed, of which more than half are connected with a fixed interest rate for the whole period.

This trend had started in the middle of last year, when one in three mortgages had a fixed interest rate for the entire duration. Then, with rising inflation and fears of rising interest rates, the share of fixed interest rates rose rapidly.

Indicatively, in the first two months of the year, a total of 138 million euros in new mortgage loans were disbursed, of which 64 million euros were linked to a floating interest rate, according to data from the Bank of Greece. The remaining 53% of new disbursements concerned fixed interest rates. The same picture is confirmed in the first quarter, with total disbursements of about 260 billion euros and from the provisional data of April (about 50 million), where the percentage of fixed interest rates reaches 57% to 60%.

This picture in the first quarter of 2021 was completely different, as fixed rate loans accounted for about 30% of new disbursements, with floating and even those associated with the 3-month euribor. A total of about 150m euros in mortgages had been disbursed at the time. It is noted that over 90% of mortgages in the Greek market are connected to the 3-month euribor, which also -although at negative levels- follows an upward trend.

As bank executives explain, the demand for mortgages has already shown a slight decline (with the exception of March), based on the number of applications, but as a market it is moving upwards due to higher disbursements. Also, the negative imprint of the current situation appears with a time lag, as the period between the application and the disbursement can reach up to 3 months.

As inflation persists, prices rise, disposable income gnaws, but at the same time rents are rising, making the decision to take out a home loan more difficult. The solution of fixed interest rates protects against future interest rate hikes, which according to bank executives is the most likely scenario. In fact, they do not rule out that the first increases will start immediately and by the end of the year have reached up to 1 unit – at fixed and floating interest rates.

With these data and, as the decision for a mortgage becomes even more difficult, the banks expect more obvious signs of fatigue in demand after May-June and, if the current situation continues, without any improvement.