ECONOMY

Return of the loan-or-rent dilemma

return-of-the-loan-or-rent-dilemma

The dilemma between paying a monthly mortgage loan installment or rent that had preoccupied hundreds of thousands of households during the 1990s and 2000s is, albeit timidly, re-emerging.

The question has arisen in tandem with the gradual return of banks to the mortgage market and the stimulation of buying interest, which has led to a rise in such transactions compared to a few years ago. 

Given the increase in rental rates as well as selling prices, prospective buyers are asked to consider several factors.

However, what is beyond doubt is that the number of households preoccupied with this dilemma is far fewer compared to the pre-financial crisis period.

Indicatively, according to the Bank of Greece during the 2000s, 85% of home sales were financed by mortgage loans. At the same time, transactions in the housing market ranged from 90,000 to 150,000 properties for most of the decade.

The data today is completely different, given that an estimated three out of 10 home sales are financed with bank loans, which in part explains the reasons why transactions do not exceed 25,000-35,000 on an annual basis. 

However, those who opt for a loan and get it approved will usually have to finance with equity, a percentage of 15-30% of the total value of the property to be acquired.

Nonetheless, owning a home is still beyond the reach of the average person.

According to Giorgos Giokas, sales manager and co-founder of IMS (Individual Mortgage Solutions), which operates in the mortgage market, the average mortgage loan disbursed is between 110,000 and 120,000 euros, an increase of 15-20% compared to 2019, when it was set at 100,000 euros. This increase reflects the corresponding increase in the prices of homes sold. Based on this data, the average monthly instalment for a 30-year loan is around 550 euros.