Greek borrowers face higher ECB rate costs

The gap between what banks pay depositors and charge borrowers remains wide. Bank of Greece data for July show the average weighted rate on new deposits at just 0.39%, compared with 4.67% on new loans, leaving a spread of 4.28 percentage points. Overnight household deposits paid only 0.03%, while time deposits up to one year yielded 1.24% for households and 2.02% for businesses.

That asymmetry gives lenders room to protect profitability even as funding costs rise. Greek banks have not yet matched the more aggressive deposit pricing seen elsewhere in Europe, where BBVA is offering 4% gross for six months on new money in Italy and ING is advertising 3.75% for four months in Germany, but digital banking makes cross-border comparison and money movement easier than before.

For borrowers, the effect is immediate. Existing loans in Greece averaged 4.81% in July, up from 4.74% in June, and a full 25-basis-point pass-through on a 20-year, 100,000-euro mortgage would add roughly 13 euros a month, or about 3,100 euros over the life of the loan. That raises pressure on households already facing higher debt-service costs and could revive calls for relief measures on older variable-rate mortgages.

The ECB move also strengthens the case for fixed-rate lending products. Borrowers locked into truly fixed rates are insulated, but those on hybrids that reset after an initial fixed period face a bigger bill when those terms expire, keeping refinancing and household budgets in focus.

Investors are likely to view the policy backdrop as supportive for bank earnings in the near term, even as it weighs on loan growth and household demand. The next catalyst is the ECB’s next meeting and incoming inflation data, which will determine whether this is the last hike of the year or merely another step in a longer tightening cycle.