Cyprus Sees Significant Decline in New Loans Despite Interest Rate Cuts in January 2025

Despite a reduction in interest rates, the volume of new loans in Cyprus saw a notable decline in January 2025, according to data released by the Central Bank of Cyprus (CBC). The net new loans decreased significantly, dropping to €318.7 million, compared to €592 million the previous month. The drop was primarily attributed to a decline in business loans, while consumer and housing loans showed mixed trends.

According to the CBC’s release, the net new consumer loans increased to €25.2 million, up from €16.9 million in December. Meanwhile, net new housing loans decreased to €87.6 million, from €95.5 million in the previous month. Loans to non-financial companies for amounts up to €1 million dropped to €38.2 million, compared to €77.6 million the month before. Loans to non-financial companies for amounts exceeding €1 million saw a significant decline, dropping to €167.7 million from €401.9 million in December.

Overall, the total new lending, including loan renegotiations, fell to €544.4 million, down from €736.2 million in the previous month. New consumer loans rose to €26.5 million, compared to €17.9 million the month before, and new loans for home purchases increased to €132.6 million, up from €120.7 million. Loans to non-financial companies for amounts up to €1 million fell to €53.2 million, compared to €90.6 million in December, while loans to non-financial companies for amounts exceeding €1 million decreased to €317.4 million, down from €499.8 million.

In terms of interest rates, a downward trend was observed in household loan rates in January 2025, while interest rates for large business loans saw a slight increase. The interest rate on consumer loans decreased to 6.25%, down from 7.20% the previous month. The interest rate on home loans decreased to 4.47%, compared to 4.75% in December. The CBC noted that the mortgage portfolio of new house loans (NΧΙ) consists of various types of such loans, including loans for first homes, holiday homes, and others, each carrying different risks and interest rates. The composition of this portfolio changes monthly, which affects the weighted average interest rate, regardless of the changes in the rates of the new house loans.

The interest rate on loans to non-financial companies for amounts up to €1 million fell to 5.08%, compared to 5.11% in the previous month. Conversely, the interest rate on loans to non-financial companies for amounts exceeding €1 million increased to 4.90%, up from 4.82% the previous month.

Regarding deposits, the interest rate on one-year term deposits from households decreased to 1.34%, down from 1.79% in the previous month. The corresponding rate for deposits from non-financial companies rose to 1.80%, compared to 1.73% in December.

By fLEXI tEAM