New Loan Volume in Cyprus Drops by 22.8% in February, Interest Rates Show Mixed Trends

The volume of new loans issued in Cyprus experienced a sharp decline of 22.8% in February 2025, reaching €246.1 million, down from €318.7 million in January, according to a report released this week by the Central Bank of Cyprus (CBC). This marks the second consecutive month of significant reduction in new lending.

The CBC attributed this decline primarily to a steep drop in large business loans, while the mortgage loan market showed a slight improvement. Including renegotiations, total new loans in February stood at €431.8 million, down from €544.4 million in the previous month.

Consumer loans also saw a decrease, with total loans dropping to €21.2 million and net new loans amounting to €19.3 million, compared to €26.5 million and €25.2 million, respectively, in January.

Housing loans, however, demonstrated an increase, rising to €152.1 million, with net new loans at €92.8 million, compared to €132.6 million and €87.6 million in January.

Loans to non-financial corporations for amounts up to €1 million also increased slightly, reaching €55.8 million, with net new loans at €42.0 million, up from €53.2 million and €38.2 million in the previous month.

In contrast, loans to non-financial corporations exceeding €1 million experienced a substantial decline, falling to €188.1 million, with net new loans at €92.0 million, compared to €317.4 million and €167.7 million in January.

Meanwhile, interest rates displayed diverging trends, with household rates rising while business rates declined. The CBC reported that the interest rate on consumer loans increased to 7.11% in February, up from 6.25% in January. Similarly, the interest rate on housing loans rose slightly to 4.56%, compared to 4.47% in the previous month.

The CBC clarified that this increase in interest rates was primarily influenced by changes in loan amounts rather than direct adjustments made by individual Monetary Financial Institutions (MFIs). The bank explained that the mortgage loan portfolio of MFIs includes various types of loans, such as those for primary residences and holiday homes, each with different risk profiles and corresponding interest rates. As the composition of this portfolio changes monthly, the weighted average interest rate fluctuates independently of any direct modifications by financial institutions.

Conversely, interest rates for business loans showed a downward trend. The rate for loans to non-financial corporations for amounts up to €1 million fell to 4.66% from 5.08% in the previous month. Similarly, the interest rate for loans exceeding €1 million declined to 4.48%, down from 4.90%.

Deposit interest rates also exhibited mixed trends, according to the CBC. The interest rate for household term deposits of up to one year rose to 1.51%, up from 1.34% in January. On the other hand, the interest rate for deposits from non-financial corporations decreased to 1.54%, compared to 1.80% in the previous month.

By fLEXI tEAM