Interest rates: Significant increase in loan installments

Family budgets are expected to come under significant pressure from the increase in interest rates. And this is expected to intensify in the coming period, as interest rate increases by the European Central Bank are expected to continue, following the policy initiated by the Federal Reserve Bank of the USA and the Bank of England.

Speaking on Radio Proto and the program Morning Press, the economist Stelios Platis noted that if we calculate the 1,25% increase that occurred in the last period in interest rates from the ECB on an average loan of 200.000 euros, we will find that the increase in the monthly installment it amounts to 208 euros per month. If the increase continues, as noted by Mrs. Lagarde and reaches 1,75%, then the increase in the monthly installment of the loan will approach 300 euros. This is a significant increase for the family budget. For this reason, Mr. Platis noted that households should readjust their expenses.

Asked whether interest rate increases will be immediately applicable, Mr. Platis noted that this depends on the policy followed by each commercial bank. However, experience shows that interest rates rise immediately, Mr. Platis noted. As far as deposits are concerned, we are not expected to see immediate interest payments as in the past, but what we may see is an end to liquidity charges by banks.

Already, the Bank of Cyprus has announced that "as a result of the recent and in view of the expected increases in interest rates that prevail in the international markets, the Bank of Cyprus Public Company Ltd announces that it will remove the application of the Liquidity Cost charge to the credit balances of legal entities in deposits in Euro, with effect from 01/12/2022", states the Bank of Cyprus and adds that information letters will be sent to all affected customers.

Source: Economytoday