The European Central Bank (ECB) reported this week that euro area borrowing costs were broadly stable in July, while recent Cyprus data showed deposit rates remained substantially below the euro area average and lending rates stayed comparatively high.

The ECB said the composite cost of borrowing for new loans to corporations across the euro area was broadly unchanged at 3.80 per cent in July, while the corresponding indicator for new household loans for house purchases also remained broadly stable at 3.54 per cent.

The figures provide a backdrop for Cyprus, where banks continued to offer lower returns on savings than their euro area counterparts while charging higher rates on several categories of business and household borrowing.

In Cyprus, the interest rate on household deposits with an agreed maturity of up to one year rose to 1.42 per cent in June, from 1.25 per cent in May, according to Central Bank of Cyprus (CBC) data.

However, this remained well below the 2.03 per cent euro area average for comparable deposits.

The gap was similar for businesses, with the average rate on fixed-term deposits of up to one year held by non-financial corporations in Cyprus rising to 1.41 per cent, from 1.31 per cent, compared with a euro area average of 2.19 per cent.

The difference between Cyprus and the wider euro area comes as deposits held with Cyprus financial institutions continued to grow strongly in July.

The CBC reported that deposits increased by a net €562.3 million during July, although the monthly increase was below the €601.2 million recorded in June.

The rise was largely driven by Cyprus residents, whose deposits increased by €603.2 million.

Household deposits rose by €195.7 million, while deposits held by non-financial corporations increased by €257.1 million.

Deposits belonging to other domestic sectors rose by a further €150.4 million.

The total outstanding balance of deposits consequently reached €59.2 billion at the end of July, more than twice the corresponding €28.3 billion balance of loans.

The annual growth rate of deposits also accelerated to 6.2 per cent, from 5 per cent in June.

The stronger flow of deposits contrasts with the relatively modest returns available to savers compared with the euro area as a whole.

At the same time, total loans in Cyprus fell by a net €68.7 million in July, reversing the €499.4 million increase recorded in June.

The decline was mainly attributed to €90 million in loan repayments by residents of other euro area member states.

Loans to Cyprus residents nevertheless recorded a small net increase of €1.8 million, reflecting contrasting movements among households and businesses.

Household borrowing increased by €65.7 million, while loans to non-financial corporations fell by €79.6 million.

Lending to other domestic sectors increased by a combined €15.8 million, partly offsetting the decline in business lending.

Despite the July contraction, the annual growth rate of lending remained strong at 11.1 per cent, although it eased from 11.6 per cent in June.

The ECB’s July figures showed that, across the euro area, the cost of borrowing for companies was broadly unchanged, but there were sizeable movements between different types of loans.

The rate on new corporate loans of more than €1 million with a floating rate and an initial fixation period of up to three months fell by 7 basis points to 3.49 per cent.

For loans of the same size with an initial fixation period of more than three months and up to one year, the rate increased by 17 basis points to 3.84 per cent.

The rate on new corporate loans of more than €1 million with an initial fixation period of more than 10 years fell by 5 basis points to 3.73 per cent.

For smaller corporate loans of up to €250,000 with floating rates and an initial fixation period of up to three months, the average rate declined by 8 basis points to 3.83 per cent, with the ECB attributing the movement to both interest-rate and weighting effects.

For sole proprietors and unincorporated partnerships, the rate on new loans with a floating rate and an initial fixation period of up to one year increased by 18 basis points to 4.29 per cent.

The Cyprus figures remained higher in several comparable lending categories.

The rate on Cyprus loans of up to €1 million to non-financial corporations rose to 4.32 per cent in June, from 4.27 per cent in May.

For business loans exceeding €1 million, the average Cyprus rate stood at 3.97 per cent, according to the CBC data.

Another CBC measure showed the rate on loans exceeding €1 million rising to 4.07 per cent in June, from 3.85 per cent in May.

Household borrowing costs in Cyprus were more mixed.

The interest rate on consumer credit fell to 6.50 per cent in June, from 6.95 per cent in May.

The rate on housing loans also edged down, reaching 4.04 per cent, compared with 4.06 per cent in May.

The CBC has cautioned that the weighted average rate on housing loans can move from month to month because the portfolio includes different types of lending, including loans for primary residences and holiday homes, which carry different levels of risk and interest rates.

Consequently, changes in the composition of new housing lending can alter the average rate even when banks have not changed their underlying lending rates.

Across the euro area, the ECB reported that the composite cost of borrowing for new household loans for house purchases was 3.54 per cent in July, while individual categories also showed modest increases.

The rate on housing loans with floating rates and an initial fixation period of up to one year increased by 4 basis points to 3.69 per cent.

Loans with an initial fixation period of more than one and up to five years rose by 5 basis points to 3.57 per cent, while those with a fixation period of more than five and up to 10 years increased by 6 basis points to 3.73 per cent.

The rate on housing loans with an initial fixation period of more than 10 years was almost unchanged at 3.36 per cent.

Euro area households also faced a rise in consumer borrowing costs, with the interest rate on new consumer loans increasing by 9 basis points to 7.60 per cent.

The contrast between borrowing and saving rates also extended to new deposits in the euro area.

The composite interest rate on new deposits from corporations with an agreed maturity increased by 5 basis points to 2.26 per cent in July.

For corporate deposits with an agreed maturity of up to one year, the rate rose by 5 basis points to 2.24 per cent, while the rate on overnight corporate deposits remained almost unchanged at 0.60 per cent.

For households, the composite rate on new deposits with an agreed maturity increased by 5 basis points to 2.14 per cent.

The rate on household deposits with an agreed maturity of up to one year increased by 7 basis points to 2.10 per cent.

Deposits redeemable at three months’ notice remained almost unchanged at 1.18 per cent, while overnight household deposits stayed at 0.28 per cent.

The Cyprus figures therefore point to a banking market in which savings rates remain markedly below euro area levels, even as the domestic deposit base continues to expand.

The CBC also reported that Cyprus banks maintained stable lending standards during the second quarter of 2026, while demand for credit from households strengthened.

Credit standards for loans to businesses and for household borrowing, including housing loans and consumer credit, remained unchanged compared with the previous quarter.

Banks had previously expected some tightening of lending standards during the quarter, but those expectations were not realised.

The CBC survey found that all factors affecting credit standards across the different categories of lending had a neutral impact during the quarter.

For businesses, lending standards remained unchanged for both small and medium-sized enterprises and large companies, continuing at the relatively tight levels seen since the second quarter of 2024.

Credit standards for housing loans have remained unchanged since the first quarter of 2024, following earlier tightening.

Standards for consumer credit and other household lending have likewise remained unchanged since the first quarter of 2024.

Banks expect lending standards to remain stable for both businesses and households during the third quarter of 2026.

However, uncertainty linked to the Middle East crisis weighed on some business investment plans during the second quarter, suggesting that the availability and cost of credit are not the only factors influencing corporate borrowing and investment decisions.

The combination of strong deposit growth, continued double-digit annual loan growth and relatively high lending rates leaves Cyprus with a banking market that is performing strongly in terms of balance-sheet growth, but where the cost and return of banking services remain notably different from the wider euro area.

For savers, the most striking difference remains the gap between the rates available on fixed-term deposits in Cyprus and those elsewhere in the euro area.

For borrowers, meanwhile, the latest figures indicate that several categories of corporate lending continue to carry rates above comparable euro area benchmarks, even as some household borrowing costs have eased.