Nicosia: Deposit rates in Cyprus have plummeted to the lowest level in the euro area as of July, according to the Central Bank of Cyprus (CBC). In contrast, interest rates on new loans are aligning closely with the euro area median, a situation attributed to the significant liquidity within Cypriot banks.
According to Cyprus News Agency, the interest rate on household term deposits with a maturity of up to one year decreased to 1.27% in July from 1.42% in June. Conversely, the rate on deposits by non-financial corporations rose to 1.56% from 1.41%. The CBC highlighted that these deposit rates are an anomaly within the euro area, reflecting the high liquidity and relatively small scale of the Cypriot banking market.
The Liquidity Coverage Ratio (LCR) for Cypriot banks was reported at 319% in July 2026, significantly higher than the euro area median of 189% and the EU average of 158% as of March 2026. This liquidity surplus sets Cyprus apart within the euro area.
In contrast, the new lending rates in Cyprus are generally in line with the euro area median. The weighted average rate on new housing loans to households decreased to 3.78% from 4.04% in June, with a margin against the euro area median of -0.2 percentage points. The rate on consumer credit increased to 6.94% from 6.50%, while corporate loan rates rose to 4.47% from 4.32% for amounts up to £1 million and to 4.29% from 4.07% for loans above £1 million.
For existing loan balances, rates also remained close to the euro area median, with a margin of -0.1 percentage points for households and 0.3 percentage points for non-financial corporations. The CBC noted that the monetary policy transmission to existing loans in Cyprus was aligned with other euro area countries, although the pass-through to new corporate loans was weaker.
A notable trend is the shift towards fixed-rate borrowing. The share of new household housing loans with a variable rate has decreased from nearly 100% in early 2022 to 12.1% in July 2026, below the euro area median. Across new loans to households and non-financial corporations, the variable-rate share now stands at 56.1%, also below the euro area median. This shift suggests a change in borrowers' approach to interest-rate risk, which banks are urged to consider in their risk-management strategies.
Additionally, net new lending fell sharply to £415.0 million in July from £626.2 million in June. Net new housing loans declined to £149.5 million from £152.1 million, while net new loans to companies of more than £1 million dropped to £162.3 million from £387.5 million.