In Cyprus, discussions have begun on a large-scale reform that could change the rules for recovering mortgage debt. In particular, a package of bills has been submitted to Parliament aimed at simplifying procedures and strengthening borrower protection. The first discussion has already taken place in the finance committee in a closed format — this approach was chosen to find a compromise more quickly between banks, the state, and debtors.
The new rules are expected to affect thousands of homeowners, especially against the backdrop of rising interest rates in the eurozone and increasing financial pressure on households. In recent years, the problem of overdue loans has remained relevant for the country, despite a gradual decline in the share of “bad” loans.
How they want to change the recovery procedure
The main innovation concerns expanding the role of the Financial Ombudsman of Cyprus. It is planned to make the debt recovery process more flexible and accessible, as well as to add the possibility of debt restructuring. This will allow borrowers to resolve disputes without going to court and to reach agreements with banks more quickly.
Currently, the recovery process is formally regulated by strict deadlines, but in practice it often drags on for months or even years due to court proceedings. The new reform aims to shift the focus to out-of-court settlements and reduce the number of conflicts reaching court.
It is also expected that borrowers will receive more time for negotiations with banks and companies that have purchased non-performing loans. Specialists in financial insolvency are planned to be more actively involved in the process, which should increase the chances of retaining housing.
Possible temporary protection of primary housing
The strengthening of the powers of the financial commissioner is also being discussed separately. He will be able to intervene in disputes between borrowers and banks if the debt amount does not exceed a certain threshold, and his decisions will be binding. This should speed up case resolution and reduce the burden on the judicial system.
At the same time, Parliament is considering measures to protect primary housing. In particular, the possibility of temporarily suspending property repossession for debts is being discussed. Similar mechanisms have already been applied in the past in the form of temporary moratoriums, especially during periods of economic crises.
Why the reform is important right now
Minister of Finance Makis Keravnos and representatives of the Central Bank of Cyprus took part in the discussion of the bills. They emphasized that the changes are necessary to balance the interests of the banking system and citizens.
Against the backdrop of rising living costs and increasing expenses, including higher electricity and loan costs, many families in Cyprus are facing difficulties in servicing mortgages. Therefore, the authorities are striving to create a more flexible system that will help avoid mass property repossessions while maintaining the stability of the financial sector.