Explore the key factors influencing home loans in Greece, including income thresholds and property valuations.
In a significant regulatory shift, the Bank of Greece has instituted new parameters governing mortgage loan servicing, effective January 1st. These stipulations delineate that borrowers must ensure their mortgage repayments do not surpass 40% of their annual income, while the loan amount itself is capped at 80% of the property’s commercial value. However, a notable exception exists for first-time homebuyers, who may allocate up to 50% of their income towards loan servicing and can secure financing up to 90% of the property’s value.
The classification of a “new buyer” is intriguingly broad; it encompasses individuals seeking bank financing for their inaugural home purchase, irrespective of any prior property ownership—yes, even if one has inherited a lovely villa from dear old Aunt Gertrude. This nuanced definition aims to stimulate the housing market by providing more favorable terms for those entering the fray.
Moreover, the calculation of the debt service-to-income ratio is comprehensive, taking into account all existing debts with the bank. For instance, if a mortgage payment consumes 30% of a borrower’s income, the bank will aggregate any additional financial obligations—be it consumer loans or credit card debts—when assessing the overall ratio. Notably, the income considered for this calculation is net, meaning it is the amount remaining after the taxman and insurance premiums have had their share.
Banks are afforded a modicum of flexibility, permitted to exceed the aforementioned thresholds for up to 10% of new disbursements. This excess will be meticulously monitored, distinguishing between first-time buyers and other borrowers. Interestingly, data indicates that the newly instituted limits align closely with existing lending practices; approximately 94% of new mortgage loans already adhere to the 80% property value cap. Furthermore, a substantial 70% of new borrowers allocate no more than 30% of their salary towards mortgage payments, while a mere 2.2% exceed the 50% threshold.
Despite the apparent alignment with current lending trends, the formal introduction of these limits is perceived as a tightening of housing credit policy. This comes in response to a persistent decline in housing lending, exacerbated by substantial repayments that overshadow new disbursements. Current statistics reveal that mortgage balances have dwindled to €27 billion from a staggering €80 billion in 2010, with new disbursements projected to reach approximately €1.5 billion in 2024, a modest increase from €1.3 billion in 2023. Notably, this new financing landscape includes allocations from the “My House 1” program, which is anticipated to contribute around €500 million in bank borrowing.
The funding gap in housing credit further elucidates the declining percentage of owner-occupied homes in Greece, which has plummeted to an estimated 70%. This trend raises pertinent questions about the accessibility of housing in a market increasingly characterized by stringent lending practices and economic constraints. As the landscape evolves, one can only ponder: will the dream of homeownership remain just that—a dream?
