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Cost of money drops but for banks only

01/08/2013 06:45
Deposit interest rates dived by more than two hundred basis points in recent months but without any effect on the cost of money for corporations and households.

The central bank’s regulatory intervention to banks in April, and imposition of a capital penalty on high yield deposits, led to a sharp decline in deposit interest rates, but has not yet affected the interest rates charged for loans.

Businesses and households continue to borrow at interest rates that are among the highest in the Eurozone.

Developments in the financial sector had an immediate and major impact on deposit interest rates, by significantly reducing the attractiveness of deposits as a form of investment.

Interest rates on new deposits in Cyprus fell to 2.34% from 2.50% in May and 4.33% in June last year.

It is the lowest level since 2008, when time series data became available.

In Greece, the cost of attracting deposits decreased to 3.89% from 4.05% in the previous month and is the highest in the Eurozone.

In Spain, the interest rates are at 1.41% while in Germany at just 0.77%.
In the Eurozone, the cost of deposits decreased to 1.88% from 2.04%.

Despite the reduction in deposit interest rates there is not a substantial change in the cost of money for businesses and households.

According to ECB data, interest rates on business loans in Cyprus in June 2013 stood at 6.35% compared to 6.33% in May and 6.66% in June 2012. Interest rates for business loans top all comparable rates in the Eurozone.

In Greece, interest rates on new business loans fell to 5.84% from 5.81%.

In the eurozone interest rates for business loans remained at the same level as in May at 3.28%.

As for the interest rates on housing loans in Cyprus, they increased to 5.37% in June from 5.02% in May and 5.74% in June 2012.

The Eurozone rate for mortgages fell to 3.28% from 3.32%.

The rate for new mortgages in Greece fell to 2.98% from 3.01%.