Cyprus new lending jumps to €495.3 million in March

Cyprus continued to record some of the lowest deposit interest rates in the eurozone in March 2026, even as lending rates remained broadly aligned with euro area averages, according to figures released by the Central Bank of Cyprus (CBC).

The CBC said the level of interest rates on outstanding loans in Cyprus remained close to the respective eurozone median.

The spread between Cyprus and the eurozone median stood at zero for household loans and 0.4 per cent for loans to non-financial corporations.

At the same time, the central bank said interest rates on deposits in Cyprus remained outliers within the eurozone, standing at the lowest levels among member states.

According to the CBC, this was linked to the excess liquidity of Cypriot credit institutions, which remains among the highest in the eurozone.

The central bank said the liquidity coverage ratio (LCR) in Cyprus stood at 315 per cent in March 2026, compared with a median of 186 per cent and an average of 163 per cent across the European Union in December 2025, which was the latest available data.

The CBC also attributed the low deposit rates to the relatively small size of the Cypriot banking sector.

In terms of deposit rates, the interest rate on household deposits with an agreed maturity of up to one year fell marginally to 1.18 per cent in March, compared with 1.19 per cent in February.

Meanwhile, the corresponding rate for deposits from non-financial corporations increased to 1.39 per cent from 1.19 per cent the previous month.

Among lending categories, the interest rate on consumer credit fell to 6.79 per cent in March from 7.12 per cent in February.

The interest rate on loans for house purchases rose to 3.86 per cent, compared with 3.45 per cent the previous month.

The CBC explained that the mortgage portfolio of monetary financial institutions includes various categories of loans, such as primary residences and holiday homes, carrying different risks and interest rates.

It added that changes in the composition of the housing loan portfolio from month to month can affect the weighted average interest rate independently of banks’ pricing decisions.

Interest rates on loans to non-financial corporations for amounts up to €1 million increased to 4.40 per cent from 4.22 per cent in February.

For corporate loans above €1 million, the interest rate declined slightly to 4.10 per cent from 4.15 per cent.

The central bank also reported a sharp rise in the volume of pure new loans in March 2026.

Specifically, pure new lending increased to €495.3 million in March from €328.7 million in February.

Total new lending, including renegotiated loans, reached €730.4 million in March, compared with €435.1 million the previous month.

Pure new consumer loans increased to €24.6 million from €20.1 million in February, while pure new housing loans rose to €142.8 million from €115.1 million.

Pure new loans to non-financial corporations for amounts up to €1 million increased to €54.7 million from €47.5 million.

What is more, for loans above €1 million, pure new lending climbed significantly to €266.9 million from €137.3 million.

The CBC also examined how monetary policy changes are transmitted through the banking system in Cyprus compared with the rest of the eurozone.

The central bank said that the relationship between interest rate reductions during the monetary easing period from June 2024 to March 2026 and increases during the monetary tightening period from June 2022 to December 2023 was broadly in line with other eurozone countries for outstanding loans.

For new loans to households for house purchases, Cyprus recorded rates slightly below the eurozone median, with a spread of minus 0.2 per cent.

For new loans to non-financial corporations, the spread stood at 0.4 per cent.

However, the CBC said the pass-through of interest rate changes to new corporate lending in Cyprus appeared weaker than in many eurozone countries, both during periods of monetary tightening and easing.

The central bank reported that the average pass-through rate in the eurozone during the monetary tightening period exceeded the rate during the easing period by 28.3 per cent for housing loans and 15.5 per cent for loans to non-financial corporations.

In Cyprus, the corresponding difference was much smaller for households at 4.0 per cent, while for non-financial corporations the pass-through rate during tightening was actually 6.1 per cent lower than during easing.

The CBC also reported that the share of new housing loans with variable interest rates continued to decline sharply.

The proportion of new housing loans with floating rates fell from almost 100 per cent at the beginning of 2022 to 12.2 per cent in March 2026.

According to the central bank, this level is now close to the eurozone median. The CBC said this trend may partly reflect borrowers increasingly choosing fixed-rate loans during the initial years before later converting to floating rates.

It added that the change signals a shift in borrower behaviour regarding interest rate risk and should be considered in banks’ risk management policies.

The broader share of new loans to households and non-financial corporations with floating interest rates also continued to decline.

From almost 100 per cent in early 2022, the proportion fell to 61.5 per cent in March 2026, placing Cyprus below the eurozone median.

Finally, the central bank said this trend also compares favourably with the eurozone and reflects changing borrowing preferences in the domestic market.