The Cyprus Borrowers Association (Syprodat) released a statement on Monday saying that despite recent interest rate cuts by the European Central Bank (ECB), many borrowers have not noticed a decrease in their monthly loan repayments.

According to the association, this can be explained by several factors related to the way interest rates are calculated and the terms of loan agreements.

The association explained that “loans may be linked to different reference rates, such as the ECB rate, the interbank EURIBOR rate, or the base interest rates of banks”.

“The adjustment of repayments depends on the type of interest rate and the frequency of adjustments set out in the loan agreement,” it added.

The statement further clarified that most loans in Cyprus are based on the Euribor, meaning the average interbank interest rate at which European banks are prepared to lend to one another.

This rate can be quarterly, semi-annual, or annual. Moreover, the repayments on these loans are adjusted during the reference period.

For example, the association continued, “in a loan linked to the semi-annual Euribor rate, any reduction in the interest rate will be applied to the repayment after the completion of the six-month period”.

Additionally, the association said that for loans linked to the ECB rate, repayments increase or decrease in the same month that the ECB announces a change in its rate, without delay.

In contrast, for loans with a fixed interest rate, ECB interest rate cuts do not affect repayments during the fixed-rate period.

“The delay in applying interest rate cuts to loan repayments is often due to the adjustment period defined in the loan agreement,” Syprodat stated.

“It is important”, the association pointed out, “for borrowers to know the type of interest rate they have agreed upon with their bank and the frequency of adjustments”.

It further mentioned that these details are outlined in their respective loan agreement and can help borrowers understand when changes in interest rates will affect their repayments.

“In case of doubts or questions regarding the calculation of repayments, borrowers should contact their bank for clarification,” Syprodat said.

“If the loan terms are no longer favourable, borrowers may consider renegotiating or restructuring the terms with their bank,” it added.

“The association is available to assist borrowers with any support they need,” the statement concluded.