| The
            return of fixed-rate mortgagesAthens
          Plus, 5 June 2009
 
 The fall in interest rates seems to have reached its limit following
          the latest cut in the European Central Bank's (ECB) key rate to a record
          low of 1 percent and in view of projections of gradual recovery from
          next year.
 
 The prevalent view at Greek banks is that floating rates cannot be
          reduced any further, given that the prospect of recovery no longer
          appears distant and, indeed, the question is not when rates will begin
          to climb again, but at what pace.
 
 But although the average floating rate at commercial banks has fallen
          significantly from its high in 2008 of 5.92 percent in October to 3.83
          percent in March, the indications are that there is still some room
          for reduction. Banks are cautiously beginning to trim their spreads,
          mainly for mortgage loans that do not cover more than 75 percent of
          the value of the property, while the government's guarantee for the
          remaining 25 percent is seen as giving a small boost to the market.
 
 But the rekindling of demand and the prospect of recovery in the third
          quarter is fueling uncertainty regarding floating mortgage rates.
 
 National Bank's recent move to bring down the fixed five-year rate
          to 4.9 percent appears to be signaling strong competition in the fixed-rate
          segment. More banks are expected to follow soon. ECB March data confirmed
          that Greek fixed rates for between five and 10 years are among the
          highest in the eurozone - 5.26 percent in Greece, against averages
          of 4.34 percent and 4.61 percent in the eurozone for five and 10 years,
          respectively. This may be one reason why Greek borrowers still seem
          reluctant.
 
 Bankers have noted the resurgence of fixed-rate loans elsewhere in
          the eurozone, as in Germany, where the most popular form of mortgage
          credit at present is the 10-year fixed rate loan. In the eurozone as
          a whole, new medium- and long- term fixed-rate loans totaled 29 billion
          in March, against 19.7 billion for floating-rate loans. New fixed-rate
          loans over 10 years totalled 12.4 billion, while those for between
          five and 10 years came to 9.8 billion.
 
 The picture in Greece is completely different, with new fixed-rate
          loans for 10 years in March coming to just 68 of the 605-million-euro
          total, and five- to 10-year fixed rate loans reaching just 51 million
          euros.
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