“Freeze” until April 2025 enters the floating interest rates of informed mortgages. “Profit’ for the households that even if euro interest rates rise again, they will continue to pay a fixed installment and will not have to put their “hand in their pocket” deeper.
However, the “damage” from previous updates of interest rates has already been done, as most borrowers are still paying the interest.
Vangelis Durakis writes
In other words, households with variable mortgages loans after the successive increases in interest rates, even if the banks in fact “freeze” the installments and convert them into fixed ones, they cannot “scissor” capital, as they ended up paying only interest and in this way continue to drop their money in the… “bucket”.
The decision for “fixed” installments until April 2025
In any case, the banking institutions have decided to extend until April 2025, the infamous “Reward Program for Consistent Home Loan Customers”.
The regime in question – through which remained unchanged ta fluctuating domestic household mortgage interest rates throughout the previous period despite any increases – normally ended this year in April.
The banking institutions have extended the measure for another 12 months, meaning it will be in effect until April 2025.
The renewal of the program it will be done “automatically” by the Banks themselves to each beneficiary informed borrower. And of course to maintain pricing, the loan will need to stay current throughout the program.
Of course, it should be noted here that, in the event that within the period up to April 2025 there are reductions in interest rates, then the installments of the loans in question will be “cut” accordingly. In other words, the “freeze” applies only in the case of interest rate increases.
How loan installments “freeze”.
They had joined the reward program all holders of variable rate mortgages (regardless of whether they were already on the Vulnerable Households Rate Subsidy scheme) who:
- disbursed their loan by 12/31/2022 and
- the loan did not show past due debts
For the implementation of the program, the reference interest rate in force on 03/31/2023 was adopted, reduced by 0.2%, which resulted in those who joined the program not being affected by the successive interest rate increases of the European Central Bank, which and emerged during this time.
In this way, holders of floating rate loans for the period from March ’23 enjoyed the “perks” of the fixed rate.
In the “bucket” of “inflated” interest rates are installments
However, from July 2022 those who have loans with a floating interest rate will experience a “black” two years. To cover the consecutive ones adjustments to the euro’s key interest rate – which have managed to remain consistent throughout this period – have had to drop several tens of thousands of euros in the “bucket”as after 20 months they found themselves owing … more.
Something that is more than evident even in loans linked to Euro interest rates which were previously set in “fixed” installments.
Characteristic, eis the example of a mortgage loan of 250,000 euroswhich was obtained in 2007 with an interest rate linked to that of the ECB and the Bank’s profit margin of just 0.80%.
The borrower in the period of rising interest rates by Jean-Claude Trichet was forced regulate it and limit the dose.
So, to cooperation with his bank turned ite to “fixed” with an agreement to readjust it every 3 years and with the interest rate remaining variable.
The balance of the loan, with its holder being consistent in paying the installments, was formed in June 2022 in the amount of 187,393 euros.
THE borrower during that period he had managed to pay an installment that half covered the interest, with the remaining amount “gnawing away” at the capital.
That’s when the increases began interest rates from Christine Lagarde.
The dose, which paid by said borrower and which was set at 513 euros, from December 2022 onwards it went entirely to cover the increased interest… Thus, for almost 15 months he pays only interest. In particular, he has paid 7,695 euros, money that was given to pay the “broken” ones of the ECB. But it still wasn’t enough. Because the amount of the tranche was not sufficient to cover the entire increases resulting from the decisions of the Central Bank, what was “excess” went back to the capital.
So, the balance of his loan from 187,393 euros increased to 188,389. In other words, although he consistently paid his installments, he nevertheless “inflated” the capital owed to the Bank by almost 1,000 euros.
Since So for 22 months he normally pays the installments of the loan however, he finds himself owing more to the Bank.
Of course this also happens in smaller loan amountsas well as much larger ones, since they are linked to Euro-interest rates.
