The minimum deposit for housing loan: Cyprus behind most Europe

Buying a home is a significant decision for a person or a family group. And it represents an essential initial outlay for any consumer's pocket. In Cyprus, a house's purchase requires a minimum amount saved, starting with 20% of a property's value. This is not available to everyone.

There is currently a low deposit system in the UK to assist property sales: the minimum deposit is 5%, with a maximum of 10%. In Spain, for example, the warranty starts at 10%, reaching a limit of 20%. In any case, there are some Iberian banks that, by contracting a product, grant a reduction in the deposit. Meanwhile, in Cyprus, banks publish a 20% deposit on their web pages but are now demanding 25% to 30% of the house's value.

The differences between Cyprus and Europe regarding the cost of loans are not limited to mortgages to buy a home. Statistics show a considerable gap when it comes to consumer loans. The real estate business has grown significantly in recent years, and bank authorities have warned numerous occasions about the risks involved in having a higher delinquency rate than mortgages. However, the coronavirus crisis has caused a break in this activity due to economic conditions and the brake in consumption.

To understand the contextual situation a bit more, it is worth looking at the cost of housing and loan arrears. Although house prices and rents increased in the European Union during the period from 2010 to 2019, the percentage of households with arrears in paying mortgages, rents or utility bills decreased from 12.4% in 2010 to 8, 2% in 2019. The rates decreased in all Member States except Greece, Denmark, and Finland. In 2019, the highest proportions were observed in Greece (41.4% of households), Bulgaria (29.3%) and Cyprus (17.6%) and the smallest in the Czech Republic (2.8%), Germany (3.7%) and the Netherlands (4.0%).

With so many empty residences and salaries so low, compared to the rest of Europe, buying a house now is not within reach of the ordinary citizen. The government should facilitate access to a home of their own, as is the case in many other European Union countries. Thus, ensure easy access to housing and not focus on programs that are not very conducive and representative at this time. For example, in the UK, several have suggested to the government to extend the stamp tax holiday period.

In this way, between 120,000 and 160,000, additional real estate transactions could benefit from the tax reduction. By extending the holidays, buyers would have a better chance of completing sales and saving money on their transactions. The years of economic crisis and the bursting of the housing bubble resulted in a high increase in banks' non-performing loans. In this sense, applying for a 100% financing mortgage is a complicated task for the buyer.

However, there are alternatives for those who do not have the necessary savings. Some of the keys are found in the property's appraised value, the client's solvency, or financial intermediation.