Cyprus showed a decline in loan applications by both businesses and households, in the third quarter of 2023. This was influenced by strict Eurozone policies and rising interest rates, according to a survey conducted by the Central Bank of Cyprus (CBC).

Based on the survey findings, stringent economic conditions have led to tough loan approval criteria for businesses and even stricter criteria for households, with expectations of further tightening in the next quarter.

There was more marked decrease in loan demand by household compared to businesses, particularly for housing loans, which have been declining since 2022. The CBC linked this decline to high-interest rates and a weaker outlook for the housing market.

Demand for business loans also declined during Q3, though the decrease was less than anticipated. This decline was linked to general interest rate levels and reduced interest in financing fixed investments due to economic uncertainty.

Regarding lending criteria, business loan standards remained consistent, while 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.