By Staff Reporter
Some borrowers will benefit to the tune of around €165 million from the recent cuts in interest rates, but not all, the Cyprus News Agency (CNA) reported on Friday.
The total estimate in savings to borrowers after the central bank announced a 1 per cent rate cut, which was taken on board by the commercial banks, would come to €165 million but around 45 per cent of Bank of Cyprus borrowers at least, will not benefit.
The reason, the agency said was because the rates were cut only from the bank’s base rate, and not from loans linked to euribor, the rate at which euro area banks borrow funds from each other.
BoC loans linked to euribor accounts for around 45 per cent of the total though they had fallen somewhat with a drop in euribor.
The only other way to reduce the interest rate on loans tied to euribor in Cyprus would be for the banks to reduce their profit margins.
Bank of Cyprus announced that from March 1 it had reduced all loans associated with its base interest rate by 1 per cent.
The bank told CNA that borrowers had been given the choice of an immediate reduction in their repayments, or the benefit could be offset to shorten the payment period of the loan.
Sources at the bank said BoC remained the cheapest for loans because it already had the lowest lending rate to begin with.
Bank of Cyprus has reduced lending rates on 180,000 loans belonging to 94,000 customer accounts with a total annual benefit for borrowers amounting to € 57.4 million.
The co-op sector reduced rates by up to 2 per cent across the board, even to those linked to euribor, it said.
“We did it in a simple but integral way,” chairman of the Central Cooperative Bank Nicolas Hadjiyiannis said.
The co-op is however using the cut to reduce payment periods rather than individual installments but customers who wish to cut monthly repayments can ask to do so. Co-op borrowers can benefit to the tune of around €90m.
Hellenic Bank also implemented the 1 per cent rate cut, cutting the installment repayments but is also offering a reduction in the payment period if the customer wishes but again loans based on euribor are exempt.
Still, around 20,000 customers will save €13.5 million in interest payments.