Nicosia: New lending in Cyprus experienced a significant increase in May 2026, spurred by robust growth in housing loans, as the average interest rate on new mortgages rose to 4.06%.
According to Cyprus News Agency, the latest interest rate and lending statistics released by the Central Bank of Cyprus reveal that pure new loans rose to £361.9 million in May, up from £331.3 million in April.
The strongest growth was observed in housing loans, which increased to £145.5 million from £106.0 million in the previous month. Consumer loans also climbed to £23.9 million from £21.8 million, while new loans to non-financial corporations of up to £1 million increased to £63.4 million from £39.4 million. Conversely, new business loans exceeding £1 million saw a decline, dropping to £121.5 million from £156.8 million.
Interest rates on new lending showed varied trends, with the average rate on housing loans rising to 4.06% from 3.73% in April. The rate on consumer credit decreased to 6.95% from 7.19%, and the interest rate on loans to non-financial corporations of up to £1 million slightly increased to 4.27% from 4.20%. In contrast, the rate on loans above £1 million fell to 3.85% from 4.08%.
Meanwhile, deposit rates witnessed an upward trend. The interest rate on household time deposits with an agreed maturity of up to one year increased to 1.25% from 1.20%. The corresponding rate for non-financial corporations rose to 1.31% from 1.23%.
The Central Bank's analysis indicates that Cyprus's interest rates on new loans are broadly aligned with the euro area median. 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. In contrast, deposit rates remain among the lowest in the euro area, attributed to the significant liquidity in the Cypriot banking system.
The analysis also addresses the pass-through of the European Central Bank's monetary policy decisions. Cyprus aligns broadly with the euro area in transmitting interest rate changes to outstanding loans. However, the pass-through to new corporate loans appears weaker during periods of ECB monetary tightening and easing. Additionally, the pass-through of changes in ECB rates to new deposit rates remains relatively weak in Cyprus compared to most euro area countries.
The report underscores a notable shift in the composition of new mortgage lending, with a significant decline in the share of loans carrying a floating interest rate or an initial fixed-rate period of up to one year. In May 2026, this share stood at 17.8%, down from nearly 100% at the start of 2022, reflecting a growing preference for fixed-rate loans during the initial repayment years.