Businesses will have access to cheaper borrowing as well as households requesting new loans from banks. For those who have already received mortgage loans with a variable interest rate in the past, the reduction in installments will depend on the speed of further reductions in ECB interest rates (in case they continue), as the installments of these loans have been "frozen" by the banks for everyone consistent borrowers from May 2023 - with the freeze in effect until May 2025 - based on the reference rate in force at the end of March 2023 minus 20 basis points.
With the March 2023 ECB lending rate at 3.5% and the three-month Euribor - which is the benchmark for most floating-rate mortgages - just over 3%, loan installments "locked in" » with the Euribor lower than 3% and specifically around 2.8%. In this way, the borrowers were not burdened by the ECB's interest rate hikes that followed, with all the positive implications of this both for them, as their family budget was not burdened, and for the banking system.
With Euribor currently hovering around 3.2%, in order to benefit borrowers whose installments have been 'frozen', it would need to fall to 2.8% to reach the level at which the banks the interest rate for consistent borrowers). This is expected to happen around the second quarter of 2025, while the extension of the measure for consistent borrowers lasts. If benchmark rates are cut earlier, the benefit will be passed on to borrowers.
According to the CEO of Alpha Bank, Vassilis Psaltis, consistent borrowers benefited in the order of €300 million from the freezing of reference rates (Eurobor) for all floating mortgages from May 2023, until May 2025, in 2.80%
Mortgage interest rates
According to data from Deloitte in 2023, average interest rates for mortgages varied significantly between different EU countries. More specifically, last year Poland recorded the highest percentage with 8.08%, followed by Romania with 7.70% and Hungary with 7.40%.
However, Serbia also had a high rate of 6.76% with the Czech Republic not far behind at 5.90%.
By contrast, Bulgaria offered the lowest interest rate at 2.58%. Other countries with lower rates were Belgium (3.33%), Croatia (3.26%) and Spain (3.45%).
Large economies such as Germany and France had rates of 4.06% and 3.63% respectively. The UK rate was 4.68%, while the Netherlands and Denmark had rates of 4.00% and 4.86%, respectively, as well as Greece 4.10%.
The debt load on Greek households
According to Deloitte analysts, one of the most characteristic indicators of the "health" of a country's mortgage market is household debt. This represents the ratio of all outstanding mortgages to total household disposable income.
Available data show that household debt varies widely across European countries. This difference can be attributed to several factors, including the percentage of mortgage holders in each country, the maturity of their mortgage market and the evolution of the domestic housing market.
Average household debt is low in Hungary, Romania, Greece, Slovenia and Croatia, with total outstanding mortgages less than 30% of household disposable income.
In contrast, the states of Central Europe, such as the Czech Republic, Austria or Slovakia, household debt levels range between 40% and 60%, while in France and Germany - two of the largest housing markets in Europe - they still have indicators private household debt just below 80%.
At the other end of the spectrum, Denmark, Norway and the Netherlands are the champions with Denmark's debt standing at 170% of disposable household income while Norway and the Netherlands have debt approaching 180%.
