The Central Bank of Cyprus (CBC) has observed a rise in consumer loan interest rates, which increased to 6.67% in July 2024 from 6.18% in June. At the same time, the volume of new consumer loans surged to €28.0 million in July, reflecting growing demand despite higher costs. In contrast, deposit rates have declined, with time deposits from households dropping to 1.96% and those from non-financial corporations falling to 2.28%. This divergence highlights a cautious approach from banks, offering lower returns on deposits while charging higher rates on loans.
Additionally, the interest rates for housing loans edged up to 4.59% in July, showing a slight increase from 4.52% in June. Meanwhile, new housing loans rose to €134.3 million, up from €129.9 million the previous month, indicating continued demand in the housing market despite rising rates.
For non-financial corporations, the interest rate on loans increased across various categories. Loans up to €1 million saw their rates rise to 5.57%, while those exceeding €1 million jumped to 5.64%. However, the response was mixed: new loans up to €1 million slightly decreased, totaling €74.5 million in July, down from €77.8 million in June. Conversely, larger loans exceeding €1 million experienced significant growth, rising to €345.2 million in July from €272.4 million in the previous month. This suggests that while smaller businesses may be pulling back, larger enterprises continue to leverage credit for expansion.
Cyprus staying among the lowest in the EU for household deposit rate.
.
Overall, the CBC’s data for July 2024 reflects a complex financial environment in Cyprus. On one hand, higher loan interest rates indicate banks’ cautious stance amid economic uncertainty, while on the other hand, the decline in deposit rates shows that banks are not actively seeking to attract new deposits. This dynamic has led to an environment where consumer loans are becoming more expensive, yet deposits are yielding lower returns, presenting challenges for both borrowers and savers in the current economic climate.It should be noted that the Cypriot banking system is characterised by high liquidity, ranking among the highest in the EU.
