The Ministry of Finance is developing a strategy that involves banks sharing the burden of subsidizing mortgage interest rates with the state. This approach aims to secure approval from the European Commission's Directorate-General for Competition.

This initiative is part of a broader package to support citizens and businesses amid rising costs and interest rates. The government's targeted scheme will subsidize the increase in interest rates by up to 2% for housing loans issued or to be issued from January 1, 2022, to the end of 2023. However, the Ministry seeks to engage financial institutions to contribute additionally.

Dionysis Dionysiou, Head of the Economic Policy Unit at the Ministry, stated on RIK's "Challenges" program that a unilateral, state-only subsidy plan would likely not be approved by the European Commission. Instead, there must be a corresponding contribution from banks.

He recalled that during the COVID-19 pandemic, a similar plan was accepted by the European Commission under a more lenient framework regarding financial institutions. "The situation for banks has greatly improved since 2020," Dionysiou noted, adding that a similar plan in Greece was solely funded by banks.

The new scheme will cover housing loans up to €400,000, either based on the Euribor rate or a bank's prime rate, targeting individuals with an annual income of up to €50,000.

As Dionysiou explained, the proposed plan for European Commission approval aims to cover the interest rate increase. For instance, if a borrower took a housing loan in 2022 at a 4% rate, which has now risen to 6.5%, the plan would subsidize 50% of this increase, up to a 2% cap, with the remaining amount to be covered by financial institutions.

When asked whether banks would opt into the scheme, Dionysiou indicated that following the Commission's approval, the Ministry would approach them. "We know some banks are interested in participating," he added.

Additionally, the plan will cover loans transferred from a non-participating to a participating bank.