ECONOMY

Mortgage growth slowed in June 2008

The growth of demand for mortgage loans showed a sharp decline in the first half of the year, vindicating market fears of a drop in the growth rate to under 15 percent for the whole of 2008. Although June is traditionally not a bad month for mortgage loans, provisional Bank of Greece data show that the growth rate on an annual basis has shrunk from 19.5 percent last year to 12.4 percent this year, due to the rise in interest rates and a decline in purchasing power. The figures are a direct result of the 10.3 percent decline in new mortgage loans from commercial banks against a rise of 1.10 percent in the first half of 2007, thus limiting the total turnover of new mortgages issued to 1.32 billion euros from 1.47 billion euros in the same period last year. If we add to them the balance of the other outstanding mortgage loans, the total housing debt of Greek households amounts to 64.5 billion euros. Analysis of Bank of Greece data shows that households prefer fixed-rate medium-term loans, that is up to five years, which accounted for 662 million euros of the 1.32 billion euros issued in June. Mortgages with a floating rate marginally increased, compared to the same month in 2007, but this category also includes bank offers of loans with a fixed rate for at least one year, so it is not clear whether they actually have a floating rate. There was also a decline in consumer loans in June, as Greeks borrowed 777 million euros with such loans against 815 million euros in June 2007.