After extensive deliberations, the Cyprus Association of Banks has announced that local financial institutions will reintroduce a moratorium on the sale of mortgaged properties whose owners are unable to obtain Residential Titles. Loan management companies have also supported this move.
This moratorium, effective until 31 December 2024, offers borrowers temporary relief. The Cyprus Association of Banks stated that this decision aims to assist the Cyprus government and the Central Bank of Cyprus in addressing the issue of collateral property sales. For months, there have been ongoing discussions between officials about whether problematic properties should be sold. In a prior statement, Interior Minister Constantinos Ioannou revealed that out of 9,497 problematic cases currently under review, 5,417 properties remain without titles.
Background on the Moratorium
The moratorium on selling mortgaged properties in Cyprus was first introduced in 2020. Since then, the European Central Bank (ECB) and the European Commission have expressed concerns over the repeated postponements of property sales. The ECB has consistently emphasized that political interference in asset sales should not be allowed and that the legislative framework should support banks’ efforts to reduce non-performing loans (NPLs) rather than hinder them.
Despite these warnings, the moratoriums have been extended multiple times. The first suspension occurred between March and June 2020, followed by several additional extensions in 2021. This continuous postponement has significantly impacted Cyprus’ financial institutions, as they remain burdened with mortgaged properties they are unable to sell.
Financial Implications
The constant extensions of the moratorium have led to an increase in unsold mortgaged properties, contributing to a downgrade in the country’s credit rating. This has, in turn, raised borrowing costs for the government in capital markets. Given that Cyprus’ credit rating is already at the minimum investment grade, the ongoing postponements add further financial strain to the country.
Source: stockwatch.com.cy, dom.com.cy