Cypriot banks traditionally have been cautious lenders. However, over the last year or so the economic crisis has caught up with them and had a negative effect on lending.
Three Cypriot banks – Bank of Cyprus, Marfin Popular Bank and Hellenic Bank – have been heavily exposed to Greek Government Bonds. The Bank of Cyprus announced that Greek government bonds (GGB) impairment amounts to €1.32 billion, whereas Marfin, the most exposed, announced that GGB`s impairment even following a 60 per cent haircut amounts to €1.96 billion. Hellenic Bank`s impairment reaches €77 million. As a result, all three banks announced losses in 2011. Cypriot banks` exposure to Greek debt was cited as the main reason for recent repeated downgrades of the Cypriot economy by rating agencies.
As one bank told CyprusBuyingGuide.com recently, they are still lending but are tightening up even more. Some CyprusBuyingGuide.com readers reported that they are having problems securing loans from Cypriot banks in order to buy a property on the island. The above reason could partly explain why.
CyprusBuyingGuide.com contacted four Cypriot banks and collected a round-up of rates and fees for local mortgages. Interest rates vary according to the mortgage and repayment schemes, so those quoted below are the ballpark figure quoted to us by the bank loan officers.
The required deposit for newcomers to the island tends to be a bit higher than for Cypriots and people from aboard who have lived and likely worked on the island for some time. Each of the local banks quoted each point in a different manner, hence the appearance of variable consistency.
Bank of Cyprus
Interest rate: 6%
Arrangement fees: 1% of the mortgage amount.
Deposit required: 20%
Hellenic Bank
Interest rate: Approximately 6.2%
Arrangement fees: percentage of mortgage but it depends on which scheme the customer takes.
Deposit: 30%
Laiki Marfin Bank
Interest rate: 6%
Arrangement fees: depends on amount – for a mortgage of €150, 000, for example, the fees would be between €2,000 and €2, 500.
Deposit: 30%
Societé Générale Cyprus
Interest rate: 5.5%M
Arrangement fees: 0.25% of mortgage – maximum €250, plus documentation fees €50.
Deposit: 30%
As you can see, there are some differences in local bank mortgage products. Of course, applicants must provide proof of their ability to pay back the loan. Assessment time for the proposed loan is up to one month.
Most of the banks allow grace periods whereby customers can miss a month and recoup later if unexpected financial circumstances mean they will have problems paying. Duration tends to be a minimum of 15 years and up to 25 but this depends on age factors.
One final tip: one bank said that, owing to the reluctance to lend these days, if a customer can pay a higher deposit of about 40%, it could increase their chances of getting a loan.
Search for property for sale in Cyprus on Rightmove Overseas. If you’re planning to buy in or move to Cyprus and need to transfer a large sum of money, remember to use a currency specialist to exchange your pounds into euros. For more information, visit the Currency Zone or Smart Currency Exchange.
To understand the full step-by-step process to buying a property Cyprus, collect The Overseas Guides Company’s ‘Cyprus Property Buying Guide’