The demand for loans in Cyprus saw a further decline in the first quarter of 2024, with banks attributing this decrease to high interest rates, according to a report released on Thursday by the Central Bank of Cyprus (CBC).

Additionally, lending criteria for businesses became stricter after remaining unchanged for three consecutive quarters, while criteria for household loans remained stable.

According to the report, based on the CBC’s bank lending survey, the tightening of business lending criteria in the first quarter was primarily due to banks’ reduced risk tolerance and their perception of increased economic risks.

“In contrast, all factors affecting the lending criteria for households had a neutral impact during the reporting quarter,” noted the CBC.

For business loans, the stricter criteria were influenced by banks’ diminished risk tolerance and their perception of increased economic risks.

Household lending criteria, for both housing and consumer loans, remained unchanged from the previous quarter.

Regarding loan demand in Q1 2024, there was a net decrease in demand from both businesses and households, particularly for housing and consumer loans.

“The net decrease in business loan demand in Q1 2024 is attributed by banks to the increased general level of interest rates,” the CBC said in its report.

However, it was noted that the increased funding needs for fixed investments, reflecting positive economic growth prospects, as well as debt refinancing or restructuring, contributed positively to loan demand.

For households, the net decrease in demand for housing loans was attributed by banks to higher interest rates, lower consumer confidence, and weakened housing market prospects.

Looking ahead to the second quarter of 2024, banks expect lending criteria for both businesses and households to remain unchanged.

However, they anticipate a decrease in net demand for consumer and other loans from households, while net demand for business and housing loans from households is expected to remain stable.