Lenders plan for mortgages totaling 500-600 mln this year

By Alekos Lidorikis

Demand for new mortgage loans is still low in terms of quantity, but the quality of candidates is high, say competent banking officials.

“The funds that banks have made available for loans in the housing credit sector are estimated at 500-600 million euros for the whole country for the whole of the year, which is far more than the demand for household loans, which remains particularly low,” a senior official at one of the country’s systemic banks told Kathimerini.

“What is generating optimism is that most applications for mortgage loans nowadays stand out for their quality, with some seven out of 10 gaining approval, while during the financial crisis the approval rate had dropped to just four in 10,” the same official added.

The views Kathimerini has heard tend to agree that candidate borrowers are now better informed regarding mortgage credit, particularly in terms of the necessary criteria they must fulfill in order to have their application accepted. They also appear to be more measured, turning to the banks only after having made sure they will really be able to keep up with their repayments.

Another fact that has resulted in better-quality applications is that banks have strictly capped their funding rate at 75 percent of the property’s commercial value, while before the crisis the rate had reached up to 100 percent. Lenders have advertised this policy shift via leaflets and at their branches, deterring a significant number of potential borrowers from seeking a housing loan and risking rejection because they would not be able to repay it.

Banks also place emphasis on home improvement loans, as a significant number of households have opted to renovate their existing residence instead of buying a new, bigger one. Home improvement loans require visits by a bank-appointed specialist and the submission of contracts and receipts. Before the crisis such loans went straight toward other purposes.

Statistics show just how far the housing credit sector has to go to return to normal levels: New mortgages issued last year totaled just 200 million euros, down from 2 billion euros in 2011 and 16 billion euros in the heyday of 2006. The aim now is for new mortgages to climb to 1 billion euros next year.