Mortgage holders brace for rate hike
The European Central Bank (ECB) is expected to increase the cost of borrowing on Thursday in a move that will bite into the spending power of most Greek mortgage holders with home loans attached to a floating interest rate. Economists anticipate that the ECB will up its benchmark interest rate for the fourth time in eight months to 3 percent from 2.75 percent. Mortgage holders that had a home loan at about 3.5 percent in December last year may now have to face a rate of 4.5 percent. Official data show that Greeks currently owe 47 billion euros on mortgages with 95 percent of these loans secured with a floating interest rate – debt that is directly affected by the Central Bank. The impact of interest rate hikes could also affect the broader economy, since two more hikes are expected by the end of the year. For mortgage holders who owe 150,000 euros, the monthly payment is expected to rise to 950 euros on Thursday, from 869 euros in December. Apart from the negative impact on household spending, economists also say higher borrowing costs will hurt public finances. Greece has one of the highest public debts in the European Union as it owes about 107 percent of the economy’s total output. Total borrowing by the government this year alone is projected to reach 30 billion euros.
