Cypriot Banks Adjust Interest Rates Amid ECB Cuts, Anticipating Further Reductions

Banks in Cyprus have responded to the European Central Bank’s (ECB) monetary policy decisions by lowering key interest rates, with further reductions expected throughout 2025.

Theodosios Theodosiou, Director of Retail Banking at the Bank of Cyprus, emphasized the institution’s commitment to addressing societal needs, stating in an interview with state radio: “The Bank of Cyprus, with a steady focus on the needs of society, immediately implemented all the measures announced on December 20, 2024.”

He explained that the bank promptly moved to lower its interest rates in line with the ECB’s policies, reducing its reference rate for loans tied to the ECB’s base rate from 3.15% to 2.90%, effective from February 5, 2025.

As a result of this adjustment, 12,000 borrowers will see their monthly payments decrease starting this month, Theodosiou confirmed.

This marks the fifth consecutive interest rate reduction over the past eight months, amounting to a total decrease of 1.6% since the ECB began its rate-cutting cycle in June 2024. Over that period, the ECB’s base rate has fallen from 4.50% to 2.90%.

Additionally, Theodosiou noted that interest rates have also been lowered for 8,000 borrowers with loans linked to the Euribor rate, which has declined from 4.14% in October 2023 to 2.59% as of today.

Looking ahead, Theodosiou expressed confidence that additional cuts are on the horizon.

“There will be another 2-3 rate cuts within the year,” he stated, though he acknowledged that the final decision lies with the ECB. “The next meeting is in March, and all markets are expecting another reduction.”

In addition to lowering interest rates, the Bank of Cyprus has taken further steps to support its customers. Theodosiou confirmed that the bank is actively implementing measures to reward loyal borrowers, revealing that “the process of rewarding loyal borrowers is currently underway.”

As part of this initiative, approximately 13,000 members of the Pronomia rewards programme have been notified to select their preferred rewards. Among those who responded, 80% opted for cash rewards, while 15% chose a bonus reward.

Theodosiou also highlighted the bank’s support for government-backed initiatives, particularly those aimed at subsidizing mortgage rates for young couples. However, he acknowledged that one outstanding measure still needs to be implemented: “The only outstanding measure is the installation of ATMs in remote mountainous areas.”

Meanwhile, Andreas Assiotis, Head of Retail Banking at Hellenic Bank, also addressed the interest rate adjustments in an interview with state radio. He reassured that “Hellenic Bank recognises the challenges facing society due to high inflation” and has taken proactive steps to support households.

“Hellenic Bank, with over 500,000 customers, is aligned with the government and has implemented specific measures,” Assiotis stated.

He confirmed that the bank had reduced its key interest rates from 3.15% to 2.90%, benefiting approximately 6,000 borrowers. Additionally, another 90,000 borrowers, whose loans are linked to the bank’s base rate—lower than the ECB’s rate at 1.91%—will see their rates drop further to 1.75% from February 15.

Beyond rate reductions, Assiotis announced a new mortgage loan product with a fixed interest rate of 2.95% for the first three years. He provided an example to illustrate its benefits: “For a €100,000 loan at the new rate, borrowers would pay around €400 to €450 per month for the first three years.”

In a further effort to support borrowers, Hellenic Bank has introduced a new rewards programme that provides direct cash incentives based on loan amounts. Assiotis explained that a €100,000 loan would entitle borrowers to receive €1,000 in cash, which could be used for purchasing household-related products from participating merchants. The maximum cash reward under this scheme can reach up to €2,000.

Assiotis concluded by expressing optimism about the broader economic outlook, stating his belief that interest rates would continue to fall as inflation stabilises. 

By fLEXI tEAM