Banks put brake on special loan offers
Banks are putting an end to low-cost borrowing due to the cash flow crisis and its repercussions. They had already given warning of their intention to gradually discontinue their mortgage offers and some are now implementing this policy on the pretext of the core interest rate rise by the European Central Bank from 4 percent to 4.25 percent. Citibank has already raised its loan interest rates by 10 to 95 basis points, while Piraeus Bank has acted in similar fashion, taking the rate for its three-year fixed interest loans to over 6.20 percent. Smaller banks such as Probank, Attica Bank, Hellenic Bank and FBBank followed suit, while the Bank of Cyprus upped its rates yesterday. Bank officials believe that by September all banks will have joined the trend. A side effect to the crisis facing credit institutions has been the impact on enterprises. They have suffered the worst as the higher cost of money has been passed on to them, unlike households that have shouldered only a small proportion of the rate hike. At the end of May corporate borrowing soared to 98.7 billion euros, posting a 24.5 percent annual rise and offsetting the 19.3 percent drop in household borrowing over the same period. Commercial firms have the highest exposure to borrowing, followed by industry and shipping.
