A new law that has just been approved by the House of Representatives, gives a very good boost to the free economy and provides a great help both to Mortgagors as well as to Mortgagees. As the system exists at the moment, the finance houses can charge through their fluctuating rate/top up margin just about anything. On average, the charge for housing loans are on overall 1.80% - 2.5% above the base rate, reaching a total of around 7% - 8%, but in the event of delayed repayments, the charge can reach as high as +11%. Up to now, it was very difficult for a mortgagee to move from one mortgagor to another, because of the high mortgage costs. If for example an individual takes out a mortgage of say €500.000 he would have to pay:

• Study fees to Bank € 2.500

• Mortgage fees to Government [1%] € 5.000

• Valuation fees € 400

• Solicitor/stamps € 300

• Total +- € 8.200

In order for the mortgagee to move to another Bank/finance house, he has to repeat the same expense, so, more often than not, borrowers stay with their existing banks, notwithstanding the fact that they could have got a better interest rate/lower charges from others. At the same time “new products” which are constantly coming into the market by Financiers offering competitive rates/charges, normally fail to attract clients, since the clients, when considering the cost of moving from one bank to another, find that the cost and hassle is too much. The new law states that if a property is mortgaged for an X amount and the borrower wishes to cancel this and move to another Bank, the mortgage fees will be €200 only [instead of 1% of the loan amount] if it is for the same amount. If more, he will have to pay the 1% mortgage fee on the excess amount – if less, the €200 again. We will add that the other costs still remain and in the above example the cost of moving instead of being €8.200 will be reduced to €3.200. In this example if the borrower wishes to borrow €700.000 from another Bank, he has to pay all the other expenses, plus 1% on the difference [i.e. 700.000 - €500.000 X 1%] = €2,000 in addition [total €3.200 + €2.000 = €5.200]. This is a considerable saving bearing in mind the larger borrowers in particular. With the new law, competition between the Banks will improve and hopefully other costs will be reduced also, since the clients will have the freedom of moving from one bank to another. Similarly, banks, who target good clients, have now a case to aim for a better finance deals.

In the past, some Banks usually offered to cover the moving cost of clients by paying themselves the cost, but again, the banks being what they are, this initial saving was later charged on the client by one way or another.

Of course the biggest looser in this case is the state’s income, since the Government will loose the 1% mortgage fees and this is particularly bad during these difficult times of reducing state income. On the other hand, however, the borrowers will incur a lower cost and logically speaking, this saving should be reflected at the consumers’ end/economy at large at the end.

We are always taken by surprise by the capitalistic measures that this new Government of ours so called communist/socialist is taking. The shopping of foreign investors [see Quatar visit by the President] the renegotiation of the double tax agreement and the lifting of Cyprus from the black list of Russia and Italy, the permanent resident permits for cash [permanent residences = €300.000 in house purchase] and other such progressive measures, we must say, surprise us.

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