Cypriot MEP urges banks to protect homes of vulnerable borrowers

Cypriot MEP Michalis Hadjipantela asked the Association of Cyprus Banks (ACB) to strengthen protection for the main homes of vulnerable borrowers who have already repaid a substantial part of their mortgage. The letter, also sent to the Central Bank of Cyprus (CBC) and the European Central Bank (ECB), follows provisions backed by the European Parliament earlier this year calling for greater protection of first homes, particularly for vulnerable households. According to Politis, Hadjipantela is now asking Cyprus’ banks to take those provisions into account when dealing with borrowers who have remained consistent with their repayments. The issue centres on the European Parliament’s Banking Union report for 2025, on which Hadjipantela served as shadow rapporteur for the European People’s Party. Under the text approved by parliament, member states and the relevant authorities are urged to ensure adequate protection of primary residences, particularly for vulnerable households. It says consideration should be given both to the size of the property and to how much of the original loan has already been paid off, specifically referring to cases where borrowers have repaid a substantial share, such as 50 per cent. For Hadjipantela, that provision reflects an expectation that households which have acted in good faith and consistently met their obligations over a long period should receive greater protection when their main home is at risk. The wording is particularly relevant to Cyprus, where foreclosures and the treatment of vulnerable borrowers have remained politically sensitive for years. The issue is far from theoretical. CBC figures submitted to parliament showed that more than 900 homes were on the auction track in the third quarter of 2025, with the vast majority valued below €350,000. During the same quarter, 98 primary residences were sold, including 93 worth less than €350,000, a sharp increase from the corresponding period a year earlier. In his letter, Hadjipantela also pointed to the pressures facing vulnerable households when their financial position deteriorates for reasons beyond their control, including serious illness or the sudden loss of employment. Cyprus, he argued, has already experienced the economic, social and political consequences of high levels of non-performing loans, alongside the uncertainty faced by vulnerable households over housing security. He wants banks operating in Cyprus to turn the European recommendations into clear and transparent practices, while still maintaining proper risk management and financial discipline. Hadjipantela is therefore asking the association to explain what measures its members already have in place, or are planning, to bring their policies closer to the principles set out at European level. More specifically, he wants information on how banks assess whether a borrower is vulnerable, how much weight is given to the proportion of the loan already repaid and whether foreclosure decisions take account of a customer’s payment record and genuine efforts to meet their obligations. Hadjipantela had already raised the issue publicly in March, when the proposal was still making its way through the European Parliament. Speaking in an Alpha interview, he said lengthy negotiations had taken place over how first homes should be treated, pointing specifically to difficulties faced by borrowers in Cyprus. “We understand the problems surrounding first-home foreclosures in Cyprus,” he said at the time, adding that banks could at times take a tough approach. He also gave the example of a vulnerable borrower who had already repaid more than half of the original loan, arguing that this should weigh heavily against proceeding with a foreclosure. The final European Parliament wording is somewhat more cautious. Rather than setting an automatic 50 per cent cut-off, it says the proportion already repaid should be taken into account when deciding how vulnerable households are treated. That means the resolution does not itself stop a Cyprus bank from foreclosing once half a mortgage has been repaid, nor does it change Cyprus’ foreclosure laws. It does, however, put the issue firmly within the wider European debate over consumer protection in banking, and this is the provision Hadjipantela is now asking local banks to consider. Cyprus has meanwhile been trying to strengthen its own protections. In March, the government approved new safeguards aimed at giving the Financial Commissioner a greater role in debt disputes and steering more cases towards restructuring rather than foreclosure. Finance Minister Makis Keravnos described the changes at the time as an effort to protect primary residences by giving borrowers another route to reach an agreement with their lender. The European Parliament report goes further than first homes. It says banks should refrain from unfair contractual terms and commercial practices, particularly in mortgage and retail lending, while borrowers should have access to effective protection and legal remedies. Hadjipantela makes the same point in his letter, calling on credit institutions in Cyprus to show through their internal rules and dealings with customers that they comply fully with EU consumer protection rules and avoid unfair contractual practices. For him, the issue is not only about social cohesion, but also confidence in the banking system and the long-term quality of banks’ loan portfolios. At the same time, he is not arguing against a strong or profitable banking sector. On the contrary, he described a competitive banking system as an important part of Cyprus’ economic model, supporting business, investment and employment. His argument is that financial responsibility and market discipline should sit alongside social responsibility, particularly where borrowers have acted responsibly and already met most of their obligations. Hadjipantela has since listed protection of borrowers and first homes among the priorities of his work in the European Parliament, saying in his two-year review that the Banking Union negotiations had secured proposals aimed particularly at vulnerable households. These included tougher enforcement of EU consumer rules, action against abusive banking practices and stronger supervision of lenders. The banks have, however, previously cautioned against broad changes to the foreclosure framework. The banks association said in June that horizontal interventions could undermine financial stability and argued that measures should be targeted at genuinely vulnerable borrowers. That makes Hadjipantela’s intervention particularly interesting, as his argument is not for blanket protection but centres on vulnerable borrowers who have already repaid a substantial proportion of their debt. He is now asking the association for a written response, including any timetable for introducing or adjusting relevant policies, while also offering to discuss the issue directly with both the association and individual banks. By copying both the CBC and the ECB, Hadjipantela has also brought the two banking supervisors into the discussion. He is also expected to hold talks with ECB officials next week, when the issue is due to be discussed further.