Cyprus saw its net new borrowing, excluding restructurings, reach €1.73 billion in the first half of 2023, showing a modest annual increase of 1.26 per cent, according to a report released this week by the Central Bank of Cyprus (CBC).

However, the consecutive interest rate hikes by the European Central Bank (ECB) significantly slowed down the issuance of housing loans.

Notably, according to the aforementioned CBC report, the total amount of new loans in June witnessed a significant decline, dropping to €240 million from €536 million in May.

The substantial monthly new loan amount in the previous month was mainly due to a high volume of new business loans exceeding €1 million, which totalled €351 million.

It should be noted that housing loans took the lion’s share of the new borrowing for June, amounting to €84.4 million, compared to €104.7 million in the previous month.

Business loans, which traditionally hold the largest portion of new borrowing, were limited to €61.2 million in June, down from €351 million in May. This decrease might be attributed to loan application processing delays in banks during the Easter holidays in April, resulting in the shift of new loan approvals to May and inflating the total for that month.

Business loans up to €1 million totalled €42.6 million in June, compared to €48.6 million in the previous month.

On the other hand, other new loans experienced a substantial increase, reaching €30.1 million from €9.6 million in the previous month.

Consumer loans remained approximately stable, with €21.5 million in June, slightly down from €22.7 million in the previous month.

What is more, according to the data provided by the CBC, the continuous interest rate hikes by the ECB, coupled with the increase in construction costs, had a negative impact on the issuance of housing loans in the first half of this year.

In this context, new housing loans during the period reached €491 million, reflecting a 29.1 per cent decrease year-on-year.

In contrast, business loans above €1 million amounted to €817.8 million in comparison to €626.1 million in the same period last year, representing a 30.6 per cent increase.

Moreover, net new business loans up to €1 million totalled €256 million in the first half of 2023, showing a 6.8 per cent decrease from €274.6 million in the corresponding period last year.

Meanwhile, new consumer loans saw a 39 per cent increase year-on-year, amounting to €108 million, compared to €77.8 million in the same period last year.

Finally, other net new loans during the January to June period grew by 51.3 per cent and reached €61.3 million, compared to €40.5 million in the same period last year.