The Central Bank of Cyprus, the island’s Financial Commissioner and the Association of Banks are urging borrowers to seek prompt loan restructuring so that lower installments are secured.
The message was sent on Tuesday during debate in parliament with the key financial players warning that prompt action will prevent possible loan repayment difficulties due to the increased interest rates.
The European Central Bank last week announced it was raising interest rates by three-quarters of a percentage point for the second time in a row. Interest rates are expected to be further raised in mid-December.
According to the ECB and mainstream economic theory, increasing the price of money through rising interest rates leads to less borrowing and less consumption, thus, reduced inflation.
However, inflation is on an alarming rise all across Europe and imminent recession is feared along with the inability by borrowers to make loan repayments.
Financial Commissioner Pavlos Ioannou told MPs that he has already received a pile of complaints from borrowers.
He specifically referred to a letter in which affected borrowers argue that their installments will increase by up to €400 per month – a substantial enough amount for salary takers.