Cyprus households are earning relatively little on their bank deposits while facing a renewed rise in mortgage borrowing costs, according to new Central Bank of Cyprus (CBC) data that puts the country’s deposit rates among the lowest in the euro area.

The CBC’s latest analysis, covering August 2026, found that the interest rate on new household deposits with an agreed maturity of up to one year rose to 1.35 per cent, from 1.27 per cent in July, while the average rate on new house purchase loans increased sharply to 4.16 per cent from 3.78 per cent.

The figures raise questions over the extent to which Cypriot savers are benefiting from higher interest rates compared with borrowers, particularly as the CBC found that deposit rates in Cyprus are an outlier at the lower end of the euro area.

The central bank’s analysis also found that the transmission of interest rate changes to deposits has been weaker in Cyprus than in almost all other euro area countries, both for households and businesses.

At the same time, however, the picture for borrowers is more mixed, with interest rates on outstanding loans and new lending broadly close to the euro area median.

The CBC said the interest rate on outstanding loans to households in Cyprus was only 0.1 percentage points below the euro area median, while the corresponding rate for non-financial corporations was 0.3 percentage points above it.

For new lending, the weighted average rate on loans to households for house purchase was 0.2 percentage points below the euro area median, while the rate for non-financial corporations was 0.1 percentage points lower.

The latest monthly figures nevertheless show a significant increase in the cost of new mortgages in August.

The interest rate on house purchase loans rose to 4.16 per cent, compared with 3.78 per cent in July, although the CBC stressed that the figure is a weighted average covering different types of housing loans, including mortgages for primary residences and holiday homes.

Because the composition of banks’ housing loan portfolios changes from month to month, the weighted average rate can move even when the underlying interest rates offered by banks do not necessarily rise or fall by the same amount.

The cost of consumer credit also increased, with the average rate rising to 7.12 per cent in August from 6.94 per cent in July.

For businesses, the picture was more favourable, with the interest rate on loans of up to €1 million falling marginally to 4.45 per cent from 4.47 per cent.

The rate on business loans above €1m fell more sharply, to 3.67 per cent from 4.29 per cent.

The latest figures also show that households and businesses took out substantially fewer new loans in August.

Pure new lending fell to €251.40m, compared with €415.00m in July, although total new lending, which includes refinancing and other operations, stood at €390.10m compared with €686.10m a month earlier.

Pure new consumer loans fell to €19.30m from €23.90m, while total lending in the category declined to €20.70m from €26.50m.

Pure new house purchase loans fell to €114.40m, down from €149.50m in July, while total lending for house purchases declined to €141.90m from €205.80m.

New business lending of up to €1m also fell, with pure new loans declining to €35.50m from €52.30m.

For loans above €1m, pure new lending dropped to €77.00m from €162.30m.

The CBC’s wider euro area comparison provides a particularly interesting picture for Cypriot savers.

Unlike lending rates, interest rates on existing deposits in Cyprus are at the lower end of the euro area, with the central bank describing them as an outlier.

The CBC attributed this partly to the high level of excess liquidity held by Cypriot credit institutions.

Cyprus’ Liquidity Coverage Ratio stood at 313 per cent in August 2026, compared with a median of 182 per cent and an average of 158 per cent across the European Union in June 2026, the latest available EU data cited by the CBC.

The central bank also pointed to the relatively short maturity structure of Cyprus’ banking sector as a factor behind the low deposit rates.

Rates being offered on new deposits are similarly low and remain close to the rates paid on existing deposits, which the CBC said reflected the same underlying factors.

The central bank’s analysis found that the extent to which changes in market interest rates are passed through to depositors in Cyprus is weak compared with almost all other euro area countries, for both households and non-financial corporations.

This means that while the European Central Bank’s monetary policy cycle has affected borrowing costs, Cypriot depositors have seen comparatively limited transmission of those changes into the returns they receive on their savings.

The picture is different on the lending side. The CBC found that the interest rate level on outstanding loans in Cyprus is broadly comparable with the euro area median.

It also found that the transmission of monetary easing to outstanding loans since June 2024, compared with the increase in rates during the tightening period between June 2022 and December 2023, compares favourably with other euro area countries.

For new lending to households buying homes, the pass-through of both monetary tightening and easing is also broadly in line with the rest of the euro area.

For new loans to non-financial corporations, however, the transmission in Cyprus appears weaker during both periods, meaning that changes in policy rates have been passed through less strongly to business borrowers.

The CBC also highlighted a major change in the type of mortgage rates being taken out by Cypriot households.

The proportion of new house purchase loans carrying a variable interest rate has fallen dramatically, from almost 100 per cent at the beginning of 2022 to just 12.0 per cent in August 2026.

The share is now below the euro area median. The central bank said this could partly reflect borrowers choosing fixed-rate loans for an initial period, such as three to five years, before subsequently moving to floating rates.

That shift suggests that borrowers have changed their attitude towards interest rate risk, something the CBC said banks should take into account in their risk management policies.

A similar trend can be seen when household and business loans are considered together.

The proportion of new loans to households and non-financial corporations carrying floating rates has fallen from almost 100 per cent at the beginning of 2022 to 55.9 per cent in August 2026, which is below the euro area median.

The CBC said the decline could again partly reflect the use of fixed-rate loans during the early years of borrowing before conversion to floating rates.

For households, the latest figures therefore present a mixed picture: mortgage rates remain broadly comparable with the euro area, but deposit returns remain unusually low, while the cost of new house purchase loans rose considerably in August.

The central bank’s analysis suggests that the issue for Cypriot savers is less that lending rates are exceptionally high by euro area standards and more that the benefits of changing interest rates have been passed through to deposits less fully than elsewhere in the euro area.