Better loan terms for businesses
Interest rates on business loans dropped in June, while consumer loans and mortgages became more expensive, Bank of Greece data show.
Interest on term deposits increased for both businesses (2.28%, up 0.18% on June) and individuals (1.42%, up 0.11%), but Greece remains fourth from the bottom among the 20 eurozone members in interest on those deposits. The average eurozone rate on time deposits is 3.16% for businesses and 2.73% for individuals.
While interest is lower, conversely, loan rates are higher, something quite normal for a country where risk, especially in the form of delinquent loans, remains high even after a significant cleanup of banks’ loan portfolios: The average new floating-rate mortgage in Greece was 4.03% in June (up from 3.83% in May), while in the eurozone it was 3.7%. And the rate on business loans up to €250,000, even though it dropped significantly in Greece (from 7.07% in May to 5.47% in June) was still almost a percentage point higher than the eurozone average (4.79%).
While part of the higher rates of consumer loans can be explained by the European Central Bank’s 0.25% hike in its main rate, the big drops in business loans represent heightened competition for business credit plus the crucial help both of the Hellenic Development Bank, which partly subsidizes loans, and the EU’s Recovery and Resilience Fund.
While small-loan takers benefited the most, for new floating-rate loans from €250,000 to €1 million, the average rate dropped from 6.19% in May to 5.09% in June, while for bigger loans, the rate only dropped from 5.92% to 5.74%. The average fixed-term, floating loan rate to small and medium-sized enterprises dropped from 6.13% in May to 5.49% in June.
The rates of consumer loan with floating interest remained at high levels: After dipping from 12.79% in April to 12.34% in May, they rebounded to 12.58% in June. Actually, consumer loan rates have historically been high, prompting complaints and accusations of profiteering, but they are also the most likely to become delinquent. The banks still remember when such loans were too easily offered.
The interest rate margin, which rose from 5.60% in April to 5.76% in May, fell back again, to 5.51% in June.
