Cyprus housing lender plans NPL sale as part of new strategy

The Cyprus Housing Finance Corporation (HFO) is expected to become fully independent from state-owned Cyprus asset management company Kedipes by the summer of 2026, according to its general director Christoforos Kaplanis.

Speaking to the Cyprus News Agency (CNA), he also said that the organisation’s broader technological upgrade is due for completion within 2027.

At the same time, Kaplanis said the organisation’s strategic priority remains the reduction of its non-performing loan (NPL) portfolio, confirming that studies and preparatory processes are already under way for the sale of those loans.

In parallel, he urged borrowers classified as non-performing to engage with the organisation in order to explore “mutually acceptable and sustainable solutions”.

He also pointed to improving operational conditions, noting that mortgage interest rates remain at “a very good level”, while customer service times at branches have returned to normal.

Outlining recent lending activity, Kaplanis said that 265 housing loans were approved in 2022, amounting to €29 million. This rose to 372 loans worth €56 million in 2023 and further to 440 loans totalling €68 million in 2024, adding that data for 2025 is not yet available.

Against this backdrop, he said the organisation restarted its long-awaited technological upgrade on June 3, 2025, a project structured in two distinct phases.

The first phase, he explained, concerns the HFO’s operational independence from Kedipes, which is expected to take place around the summer of 2026, while the second focuses on the upgrade of the corporation’s existing systems. The overall project, launched in 2025, is scheduled to be completed within roughly two years, by 2027.

Kaplanis recalled that since 2009 the HFC computer system has operated under the cooperative computerisation company of the former cooperative sector.

Against that background, he stressed that “it is our strategic goal to have independence in our computer system”. “As a banking institution, we should have independence in our computer system,” he added.

According to Kaplanis, the aim is to complete the data transfer from Kedipes by the summer of 2026, while simultaneously implementing the technological upgrade.

This, he said, will allow the organisation to operate faster and more efficiently and, potentially, to introduce additional products, including debit cards, electronic banking services and credit cards.

He added that the new systems will be “more functional, more efficient and more secure”, while also supporting improved customer service through digital banking and card products.

Turning to asset quality, Kaplanis said that, as reflected in both previous budgets and the organisation’s legislation, the reduction of the NPL portfolio remains a central strategic objective.

“Our legislation also provides for the sale of the portfolio of non-performing loans,” he said, adding that this approach has been “registered in the budgets of previous years” and constitutes “a pillar of our strategy for reducing the portfolio”.

He confirmed that studies and internal processes for the sale of the NPL portfolio are currently under way.

In parallel, Kaplanis noted that the organisation has participated in all government schemes related to non-performing loans, adding that “the Rent-for-Installment project is underway”.

At the same time, he said the HFO is actively communicating with borrowers in the NPL category, seeking solutions either through restructuring or repayment.

“We are always at the disposal of customers to discuss in a positive spirit,” Kaplanis said, clarifying that discussions take place within the framework of Central Bank of Cyprus instructions and the applicable legal framework.

On pricing, Kaplanis said the organisation’s mortgage interest rate remains at “a very good level”, consisting of a base rate plus a margin.

The base rate currently stands at 1.09 per cent, while the margin starts at a favourable 2.2 per cent and can rise to between 2.3 and 2.4 per cent depending on the loan category.

He also referred to insurance costs, saying life insurance premiums linked to housing loans are “very, very low”, amounting to 0.98 cents per thousand per year.

As an example, he said that a borrower taking out a €100,000 loan pays €98 per year for individual life insurance.

Home insurance costs are even lower, he added, with basic coverage priced at 0.31 cents per thousand and comprehensive coverage at 0.465 cents per thousand, meaning a borrower with a €100,000 loan pays just €31 annually for basic cover.

Kaplanis also noted that the corporation applies compound interest on the remaining loan balance only once a year, rather than twice.

Kaplanis also told CNA that customer service times at HFO branches “have now returned to normal levels”, with long queues and delays that existed in the past no longer an issue.

He attributed previous delays to a period when other banks’ interest rates climbed to as high as 8 per cent, triggering a surge in applications.

“At that time, we were overwhelmed by many applications,” Kaplanis said, adding that under current conditions, fully completed housing loan applications are processed within two to three months.