Banks – 50% increase in mortgage disbursements in 2021

The four systemic groups are moving forward at full speed for mortgage disbursements of 850-900 million euros in 2021, as the demand for the purchase of housing with bank financing increases again after the first shock of the pandemic. This is the assessment of the competent mortgage directorates, taking into account the dynamics that have developed this year in this category of credit.

According to the data collected from the beginning of 2021 until the end of August for the big players in the sector, the relevant loans amounted to 500 million euros. Given the mobility in the real estate market and the increased interest in obtaining housing, mainly by young couples in the age group 30-45 years, it is estimated that by the end of the year on a monthly basis the new loans will exceed 100 million euros.

The delays that have occurred in old cases due to lockdowns and the under-functioning of public authorities have the same effect.

The situation has now normalized and the final approvals for financing these transactions are expected to accelerate.

However, even if the mortgage market moves to the level of 900 million euros this year, recording an increase of 50% compared to 2020 and 160% compared to its low at the time of the euro crisis in 2017, it will still be below the 10% of the disbursements of 2007. At that time every month 1 billion euros were disbursed and today this is about the goal of the whole year. The truth is that there is still a long way to go before loan sales can return to normal.

Interest rates

The positive thing, however, is that the upward trend seems to be consolidating. According to banking sources, the two main reasons that are currently driving demand in the real estate market and will lead to a further increase in disbursements are the following:

– First, interest rates are at zero levels in deposits and many liquidity seekers are looking for alternative financial investment placements to achieve a good annual return on their money.

With the current increased levels of rents, it is not difficult to earn 3% or 4% per year from a house that will be acquired, without taking into account in this calculation the expected increase in value. As for the latter, economists estimate that by 2027, unless something changes in the country’s macroeconomic outlook, real estate prices will run at a rate of 4% -5% without creating a “bubble”.

– Secondly, the monthly installments of mortgages, due to the new more attractive interest rates offered by banks, are in most cases lower than the rents that one can pay for the same house. In this context, it is realistic for a household to live in an apartment of 70 sq.m. earning on an annual basis about 1,000 euros by leaving the rent and acquiring a house with a mortgage. A necessary condition, of course, is to have 20% of the price for its purchase.