Low interest home loan group under increasing pressure

The Housing Finance Corporation (HFC) acknowledged on Monday delays in issuing loans to applicants, but again attributed this to understaffing.

The matter came up at the House finance committee, discussing the HFC’s budget for 2024.

HFC general manager Christoforos Kaplanis told MPs that during 2022 and 2023 there was increased demand for loans.

In 2022 the state-run organisation approved 265 loans worth a combined €31.3 million, and in 2023 it approved 374 loans worth €57.5 million.

Kaplanis said they give priority to approving home loans, so that the advance payments put down by buyers are not “lost”.

MPs grilled the HFC official about persistent complaints of delays in granting loans. Kaplanis attributed this to understaffing, saying that a process of hiring that began in 2021 was completed only last year.

He said that Nicosia and Limassol present the greatest needs, due to the size of the population. Despite their size, these two cities only have one HFC branch each.

For this reason, some loan applications filed in Nicosia and Limassol are being transferred to branches in other towns.

According to Kaplanis, at the moment it takes an average of six to seven months to examine an application.

In comments later, Akel MP Andreas Kafkalias complained that the HFC “is not at the level to adequately carry out its mission”.

He pointed to significant delays in examining applications for various state-funded schemes for non-performing loans, as well as delays in concluding restructuring agreements.

“And this at a time when commercial banks are either not giving out new loans, or the cost of lending is very high.”

The Akel MP called for steps to immediately improve staffing and tech issues at the HFC.

The HFC was established in 1980 with the aim of granting housing loans to low/medium income families. It is supervised by the Central Bank of Cyprus.

Back in October 2022 the finance ministry expressed alarm at the high amount of money owed to public-law organisations that give out loans to people for housing – loans which the state underwrites.

“The greatest risk of loss of moneys for the government presents in the loans granted to individuals through public-law organisations and other financing organisations…and where the monitoring of these loans by the involved organisations has not been as expected,” the finance ministry stated in its Fiscal Risk report.

In particular, the report flagged three organisations – the Housing Finance Corporation (the worst offender), the Central Agency for the Equitable Distribution of Burdens, and the Cyprus Land Development Corporation.

At the end of March 2022, 61.67 per cent of loans granted via the Housing Finance Corporation (HFC) were classed as non-performing. Also, the HFC terminated contracts and/or took legal action for 112 loans with a balance of €59.7 million.