High interest rates seriously hurt mortgage credit, affecting mortgage supply and demand. This stems from Bank of Greece figures, according to which mortgage disbursements in the second quarter of 2023 fell by 10.7%, while the number of loans granted in the same period showed a larger decline of 12.4%.
Loan disbursements fell from €270.3 million to €241.5 million, while the number of loan contracts signed fell from 3,535 to 3,097.
The picture at the six-month level is not particularly mixed, as despite a marginal 1.8% increase in payments to €507.8 million from €498.7 million in the first half of 2022, the number of housing contracts signed fell marginally to 6,578 in the first half of 2022. 2023 from 6,596 in the corresponding period last year.
As the Bank of England noted in its recent financial stability report, payments remain low both in absolute terms and compared to the pre-global financial crisis level.
The decline in demand was the result of households’ concerns about rising interest rates, which increase the cost of servicing their debt obligations, and rising housing prices, which make it almost impossible to attract middle-income buyers.
The banks’ policy was not accompanied by a relaxation of credit standards, which is confirmed by the decline in the weighted average ratio of loans to real estate in the second quarter of the year to 61.4% from 63.1% in the corresponding period of last year. .
This means that those who resorted to borrowing to buy a home had available equity amounting to 39.6% of the value of the property they purchased. Therefore, the weighted average loan-to-income ratio was 3.5, indicating that the total amount of loans secured by residential real estate is approximately 3.5 times greater than the annual disposable income of borrowers.
As of the third quarter of the year, the Bayti program is expected to benefit the home loan market, having gained strong interest with nearly 40,000 applications since its launch in April.