new lending — The Central Bank of Cyprus (CBC) has reported a significant drop in new lending across the island, highlighting the challenges facing the financial sector. In January 2026, total net new loans plummeted by €377.7 million compared to December 2025, reaching a total of €247.3 million.
New lending: Housing Loans Experience a Notable Decline
Within this significant downturn, net new housing loans decreased by €39.7 million, falling to €95.7 million from €135.4 million the previous month. The total new housing loans issued amounted to €138.1 million in January, down from €178.1 million in December.
Consumer Loans Show Slight Improvement
Conversely, net new consumer loans saw a minor increase, rising to €18.9 million from €17.2 million in December. This increase came from total new consumer lending of €20.1 million, compared to €18.2 million in the previous month.
Corporate Lending Faces Major Setbacks
Lending to non-financial corporations also took a significant hit. For amounts up to €1 million, net new loans dropped to €40.1 million from €60.3 million, with total lending in this category at €53.1 million in January, down from €92.5 million in December. For loans exceeding €1 million, net new loans fell sharply to €88.1 million, a stark contrast to the €406.4 million recorded in the previous month, with total lending in this sector at €277.2 million compared to €685.0 million in December.
Interest Rates on Loans and Deposits
In terms of interest rates, the CBC reported a decline in rates for both consumer and housing loans. The interest rate on consumer loans decreased slightly to 7.20 per cent from 7.22 per cent. Housing loan rates also fell to 3.70 per cent, down from 3.78 per cent in December.
On the deposit side, the interest rate on household term deposits with a maturity of up to one year remained stable at 1.20 per cent, while rates for non-financial corporations increased slightly to 1.34 per cent, up from 1.27 per cent in December.
Comparison with Eurozone Trends
The CBC highlighted that lending rates in Cyprus are approaching the eurozone median, with the margin standing at zero per cent for households and 0.4 per cent for non-financial corporations. This suggests that the transmission of monetary policies in Cyprus is in line with broader eurozone trends.
However, the CBC pointed out that deposit interest rates in Cyprus remain among the lowest in the eurozone. This discrepancy may be attributed to high liquidity levels in Cypriot banks, which significantly exceed the eurozone averages.
Shifts in Borrowing Behaviour
Interestingly, the CBC noted a shift in borrowing behaviour among households. The share of new housing loans issued with a variable interest rate has sharply declined, falling from nearly 100 per cent at the beginning of 2022 to just 11.6 per cent today. This trend is below the eurozone median and may reflect a preference for fixed-rate loans during the initial borrowing period.
Moreover, the share of new loans to households and non-financial corporations issued with variable interest rates has also been on a downward trajectory, dropping from almost 100 per cent at the start of 2022 to 64 per cent today, which is again below the eurozone median.
Implications for Financial Stability
The CBC expressed concern about these trends, suggesting that they should be taken into account in banks’ risk management policies. The current high levels of liquidity and the low deposit rates could create challenges for banks in terms of profitability and financial stability.
As the economic landscape evolves, the CBC will continue to monitor these developments closely, ensuring that policy measures are aligned with the shifting dynamics of the lending and deposit markets.
