A survey conducted by the Central Bank of Cyprus (CBC) has revealed a decline in loan applications from both businesses and households in the third quarter of 2023. The stringent economic conditions, influenced by strict Eurozone policies and rising interest rates, have led to tough loan approval criteria for businesses and even stricter criteria for households, with expectations of further tightening in the next quarter.
The survey findings indicate a more pronounced decrease in loan demand from households compared to businesses, particularly in the case of housing loans, which have been on a decline since 2022. The CBC attributes this decline to high-interest rates and a weaker outlook for the housing market.
In the realm of business loans, demand also saw a decrease during Q3, though the decline was less than anticipated. The reduced interest in financing fixed investments due to economic uncertainty and general interest rate levels contributed to this decline.
Lending criteria for business loans remained consistent, but criteria for household loans, including housing and consumer loans, became stricter due to perceived credit risks, leading to increased margins for these loans. The CBC reported a margin increase for higher-risk business loans and a net margin decrease for normal new business loans.
The survey reflects the challenging economic conditions in Cyprus, with businesses and households facing stricter loan approval criteria amidst Eurozone policies and rising interest rates. The CBC's observations provide insights into the evolving financial landscape in the region, highlighting the impact of economic factors on loan demand and lending criteria.
By fLEXI tEAM