Cyprus borrowers face higher loan repayments after ECB rate hike

Borrowers with floating-rate loans will see their repayments rise following the European Central Bank’s (ECB) latest interest rate increase, although the impact will not be immediate , the Association of Cyprus Banks (ACB) said on Thursday. The ECB raised its three key interest rates by 25 basis points, or 0. 25 percentage points, earlier on Thursday as it sought to contain inflation and maintain price stability in the euro area. The ACB said the timing and extent of any increase in a borrower’s monthly repayment would depend on the terms of the individual loan agreement and the type of reference rate involved. A repayment would generally be adjusted at the next scheduled interest rate review date, rather than immediately after the ECB decision.

Depending on the reference rate, this could coincide with the period when the new ECB rates took effect or occur every three, six or 12 months, with Euribor and banks’ base rates among the relevant benchmarks. The ACB said borrowers could determine which loans were affected and by how much by examining their loan agreements. It identified three main categories of floating-rate loans, linked to Euribor, the ECB interest rate or a bank’s base rate. The association said the size of any increase would depend on the outstanding loan balance and the remaining repayment period. As an indication, a 0. 25 percentage point increase on a €100,000 loan with 15 to 20 years remaining would increase the monthly repayment by approximately €12 to €15. The calculation would work in reverse when interest rates fell, reducing monthly repayments accordingly. The ACB said borrowers with floating-rate loans would be the most directly affected by the ECB’s decision. It stressed that the type of interest rate, whether Euribor, the ECB rate or a bank’s…