Round of rate hikes

Greek banks were quick to start responding to the European Central Bank’s (ECB) latest basic rate hike last week to 3.25 percent. As in the past, each bank will probably shape its response depending on the credit category in which it has a relative advantage. Nevertheless, the invoking of the ECB’s hike to justify increases in lending rates is largely an excuse, as the only category of loans which is directly linked to the euro rate is those of floating rate mortgage loans – and, to a lesser extent, business credit. To be sure, all other lending rates, especially in consumer credit (loans and credit cards) are not linked to ECB rates and are freely determined depending on each bank’s policy. Visiting EU Competition Commissioner Neelie Kroes last week confirmed that Greek banks have among the highest revenue from credit cards per customer (126 euros, against a eurozone average of 64 euros). Her confirmation came on top of the ECB’s recent finding that rate spreads between deposits and loans are among the highest in Greece, bringing an excessive burden on the consumer. But it seems that, once again, the ECB hike will be wholly passed on to consumers, in contrast to depositors, who are almost certain to realize the increase to a much lesser degree. Eurobank was the first to announce upward adjustments to its current and deposit account rates, which have selectively gone up by between 0.10 and 0.30 percent, whereas all loan categories had their rates adjusted by the full 0.25 percent increase in the ECB rate. Geniki Bank recently made a move characteristic of the intensifying competition in selected loan categories, by launching the cheapest consumer loan, beginning at 3.95 percent for repayment in 12 months and rising to 4.95 percent, 5.95 percent, 6.95 percent and 7.95 percent for repayment in two, three, four and six years respectively. Last week it announced that the ECB rate hike will not affect these rates. However, consumers should be aware that such a loan is burdened with a number of administrative charges for sums up to 20,000 and additionally requires security for bigger sums. Mortgage loans The National Bank of Greece (NBG) recently made an aggressive competitive move in housing credit by launching the Estia program with a rate of 3.25 percent (equaling ECB’s) fixed for one year. After the first year, the rate becomes fixed for three or four years at 4.50 percent and 4.70 percent respectively but the customer must select the period beforehand. For the remaining duration of the loan after that, which may be up to 30 years, he or she can select a fixed or floating rate. NBG’s move is seen shifting competition even more on fixed-rate loans, which have been challenging floating rates for over a year now. They now vary between 2.90 percent and 3.50 percent for three years, while rates fixed for five years vary in the 4.20-4.90 percent range. ATEbank is offering a rate of 4.20 percent fixed for the first three years and thereafter a fixed repayment installment at 0.6 percent. The loan is for 20 years and the borrower can prolong its duration for a further 10, 15 or 20 years. Citibank is offering fixed rates of 2.90 percent, 3.90 percent, 4.20 percent, 4.50 percent, 4.70 percent and 5.10 percent for one, three, five, 10, 15 and 20 years respectively.