Greek banks are launching a massive interest rate conversion for thousands of mortgage loan holders participating in step-up repayment programs. Approximately 45,000 to 50,000 borrowers will have the opportunity to convert their variable interest rate to fixed, achieving significant financial relief.
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Bank communication with customers for new loan contracts
After the August holidays, banking institutions are actively communicating with their clients through branches and management companies. Borrowers are being invited to sign a supplementary agreement that converts the original variable interest rate to fixed for the entire remaining repayment period.
According to the newspaper “Apogeumatini” and journalist Nena Malliara, the banks’ initiative aims to support customers facing increased installments due to interest rate hikes by the European Central Bank (ECB). The step-up programs provided for automatic installment increases of 15% every three years, without changes to the interest rate.
Distribution of mortgage loans across banking institutions
According to banking sources, the total value of mortgage loans in step-up programs reaches 4 to 5 billion euros in the Greek market. Piraeus Bank holds the largest share with 15,000 loans, followed by Eurobank and Alpha Bank. National Bank of Greece has a significantly smaller number of such contracts.
The average interest rate of the programs ranges between 4.5% and 5%, with some cases reaching 5.3%. Banks are proposing conversion to a fixed interest rate of 3% for the entire remaining duration.
Benefits from conversion to fixed interest rate
The change to a fixed interest rate offers double benefits to borrowers. First, it eliminates the uncertainty of interest rate fluctuations, particularly in a period where the downward cycle is approaching its end. Second, installments are converted to principal-and-interest payments, allowing simultaneous repayment of capital and interest. In step-up programs, borrowers mainly pay interest, leaving the principal for the end of the contract.
Practical examples of financial benefits
For a 100,000 euro loan with 240 installments and 5.12% interest rate, the current monthly payment amounts to 666 euros. Of this, 426 euros covers interest and only 240 euros goes toward principal repayment. With conversion to a fixed 3.12% interest rate, the monthly payment decreases to 560 euros, with 300 euros for principal and 260 euros for interest. In cases of loans with longer remaining duration, the installment may appear increased initially. However, the total benefit becomes apparent at the end of repayment.
Long-term benefits for borrowers
For example, for a 110,000 euro loan with 4.87% interest rate and 260 remaining installments, the borrower currently pays 367 euros monthly. Remaining in the step-up program, they would pay a total of 231,000 euros.
Converting to a 3% fixed interest rate, the monthly installment increases to 610 euros, but the total amount decreases to 159,000 euros. The net benefit reaches 72,000 euros, as in the step-up program the installment would eventually reach 730 euros monthly after seven gradual increases.
