Massive cut in duty on switching mortgages

DUTIES payable when a mortgage is switched from one lender to another have been “drastically cut” by the Council of Ministers following approval by the House of Representatives, Finance Minister Charilaos Stavrakis announced over the weekend.

The mortgage duty payable when a loan is transferred from one financial institution to another, or if a different property is offered as security for an existing loan, will now be 0.25 per cent of the loan with a maximum of €200. This compares to 1.0 per cent of the declared value of the property payable previously. For example, when switching a mortgage secured on a property officially valued at €500,000, a borrower will now pay €200 instead of €5,000.

Stavrakis welcomed this “very significant lightening of the Cypriot taxpayer’s burden”, which he said will also “sharpen competition between banks and will surely result in additional reductions in lending rates, which will have positive and multiple favourable consequences for the whole economy.”

“This measure will represent a fairly large cost in terms of government revenues – around €10 million annually – which the government and Finance Ministry has been happy to adopt, because we feel that the positive benefits are much larger”, the Minister added.

Stavrakis invited “Cypriot borrowers from now on to compare the loan terms offered by the commercial and co-operative banks, to choose the best terms and to switch their loans, without now having to bear the weight of high mortgage duties”.

He added that “in this way we are achieving two important benefits”, by “freeing the Cypriot citizen and businessman from being tied to one lender, and also providing yet another motive to citizens to once again start buying houses and flats.”

The decision by the Council of Ministers will come into effect immediately, as soon as it is published in the Government Gazette and is signed by President Demetris Christofias – which should happen within the next two weeks.

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