New lending in Cyprus increased significantly in May 2026, driven by strong growth in housing loans, while the average interest rate on new mortgages rose to 4.06%, according to the latest interest rate and lending statistics released by the Central Bank of Cyprus.
Pure new loans increased to €361.9 million in May, compared with €331.3 million in April. The strongest increase was recorded in housing loans, which rose to €145.5 million from €106.0 million a month earlier. Consumer loans also increased to €23.9 million from €21.8 million, while new loans to non-financial corporations of up to €1 million climbed to €63.4 million from €39.4 million. By contrast, new business loans exceeding €1 million declined to €121.5 million from €156.8 million.
As regards interest rates on new lending, the average rate on housing loans increased to 4.06% from 3.73% in April, while the rate on consumer credit fell to 6.95% from 7.19%. The interest rate on loans to non-financial corporations of up to €1 million edged up to 4.27% from 4.20%, whereas the rate on loans above €1 million declined to 3.85% from 4.08%.
At the same time, deposit rates increased, with the interest rate on household time deposits with an agreed maturity of up to one year rising to 1.25% from 1.20%, while the corresponding rate for non-financial corporations increased to 1.31% from 1.23%.
The Central Bank’s analysis shows that interest rates on new loans in Cyprus remain broadly in line with the euro area median. More specifically, interest rates on new housing loans are 0.2 percentage points below the euro area median, while new business lending rates are 0.2 percentage points above it.
By contrast, deposit rates continue to rank among the lowest in the euro area, a development which the Central Bank attributes mainly to the high level of liquidity in the Cypriot banking system.
Regarding the pass-through of the European Central Bank’s monetary policy decisions, the Central Bank’s analysis indicates that Cyprus is broadly aligned with the rest of the euro area in the transmission of interest rate changes to outstanding loans. For new housing loans, the pass-through of both interest rate increases and decreases is also broadly comparable with the euro area average.
However, the pass-through to new corporate loans appears weaker during both periods of ECB monetary tightening and monetary easing. At the same time, the pass-through of changes in ECB rates to new deposit rates remains weaker in Cyprus than in most euro area countries, a trend reflected in the relatively low deposit rates offered by Cypriot banks.
The report also highlights a notable shift in the composition of new mortgage lending, with the share of loans carrying a floating interest rate, or an initial fixed-rate period of up to one year, declining sharply in recent years.
In May 2026, the share stood at 17.8%, down from almost 100% at the beginning of 2022, indicating a growing preference among borrowers for loans with fixed interest rates during the initial years of repayment.
(Source: CNA)
