Local Mortgage Market Hits a Standstill

As of October 5, 2024, the Greek mortgage market is experiencing a persistent decline, marking Greece as the sole European Union nation with negative housing credit growth over the last three years. This trend extends back to the previous financial crisis, underscoring that mortgages are a significant issue within the banking sector, despite housing market financing costs and interest rates aligning with the European average.

Currently, the average interest rate in Greece is 4%, reflecting a decrease from last year and comparable to the European standard. Despite this, the annual mortgage financing rate was -2% at the end of July, an improvement from -3% the previous year, yet remaining consistently negative over the last three years.

A report by the European Systemic Risk Board (ESRB) highlights concerns about financial stability in the eurozone, particularly in light of recent geopolitical tensions that could impact global trade and commodity prices.

Conversely, corporate lending in Greece is bucking the household borrowing trend. ESRB data shows Greece ranks second, after Lithuania, among EU nations for the highest yearly growth in corporate financing. As of July, credit expansion for businesses reached 10%, up from 3% the previous year and totaling 8% over the last three years. Corporate loans now constitute two-thirds of Greek banks’ portfolios, amounting to €77.7 billion out of €118.6 billion total, with an average financing cost matching the eurozone's at 5.8%, also on a downward trend from last year.

The decrease in mortgage lending persists despite a narrowing of home loan spreads to about 1.5% by the end of July, down from over 2% the year prior. According to ESRB data, this decline is linked to skyrocketing real estate prices, positioning Greece among the nations with the steepest house price increases. In the past year alone, housing rates have surged by more than 10%, and by over 40% over three years, placing Greece just behind Poland and Bulgaria in terms of price escalation.