Mortgage lending in Cyprus remains a popular method of acquiring property for both locals and foreign buyers. However, not all properties meet the requirements of banks for mortgage approval.
In this blog, we will explore the types of properties in Cyprus that are most likely to be denied a mortgage loan, as well as provide up-to-date information on current mortgage market trends.
Mortgage Lending Trends in Cyprus
According to data from the Central Bank of Cyprus, there was a significant decrease in the issuance of new home loans in 2023, down by around 20% year-on-year. The volume of mortgage loans from January to September 2023 reached €746.2 million, compared to €932.4 million for the same period in 2022.
Additionally, in PwC Cyprus's report for 2023, it was noted that the cautious approach of banks toward credit policies, along with decreased demand for new loans from households—mainly due to rising interest rates—resulted in an approximately 14% reduction in new mortgage loans last year.
Buyers' Preferences When Choosing Property for a Mortgage
Despite the decrease in mortgage lending volumes, the demand for real estate in Cyprus remains stable. According to PwC Cyprus, in 2023, the total number of real estate transactions reached 24,200, which is a 3% increase compared to 2022. Notable growth was observed in the Larnaca and Paphos areas, where the number of transactions increased by approximately 20% and 3%, respectively.
The Profile of the Modern Property Buyer in Cyprus
Analysts predict that by 2025, around 70% of property buyers in Cyprus will be from the millennial and Gen Z generations—people born between 1980 and 2010. These generations, raised in the digital age, are actively working in the finance and high-tech sectors, making them financially capable and active participants in the real estate market. They value modern amenities, eco-friendliness, and technology in housing, which influences their property preferences.
Mortgage Interest Rates in Cyprus
In September 2024, mortgage rates in Cyprus decreased to 4.53%, remaining, however, at the highest level in the past four years. In comparison, the average mortgage rate in the Eurozone is 3.53%. High interest rates may influence buyers' decisions to purchase property with a mortgage, especially among the younger generation, who are seeking financial stability.
Bank Criteria for Mortgage Approval: Which Properties Will Not Be Approved for a Loan
When reviewing a mortgage application, banks in Cyprus assess not only the borrower's ability to pay but also the characteristics of the property itself. Here are some criteria under which a bank may refuse to approve a mortgage:
- Properties with Legal Issues: If the property has unresolved legal matters, such as a lack of necessary permits or disputes over ownership rights, the bank is likely to refuse the mortgage. For secondary properties, a clear and valid Title Deed is essential.
- Unfinished or Deteriorating Properties: Banks are reluctant to finance the purchase of properties still under construction without appropriate guarantees or those in a dilapidated condition, as this increases the risk of loan non-repayment. Example: residential complexes where half of the units are occupied, but the remaining buildings have been in a slow construction phase for 5-10 years.
- Properties in Low-Demand Areas: If a property is located in a region with low liquidity or weak demand for real estate, the bank may consider such an investment risky and refuse the loan.
- Properties Without a Registration Certificate: To purchase a secondary market apartment, the bank may require a property registration certificate (Title Deed). The absence of this document can lead to a mortgage refusal.
- Properties with Encumbrances: If there are encumbrances on the property, such as liens or seizures, the bank will not be willing to provide a mortgage until these issues are resolved.
Recommendations for Potential Borrowers
To increase your chances of mortgage approval, it is recommended to:
- Thoroughly Check the Legal Cleanliness of the Property: Before submitting your application, make sure the property has no legal issues and fully complies with the bank’s requirements.
- Choose Liquid Properties: It is advisable to select properties in areas with high demand, as this reduces the risks for the bank and increases the likelihood of mortgage approval.
- Gather a Complete Document Package: Provide all necessary documents confirming your financial ability and the legal status of the property.
- Consult with Professionals: Seek advice from lawyers and financial consultants specializing in the Cypriot real estate market to avoid pitfalls when applying for a mortgage.
Mortgage lending in Cyprus offers broad opportunities for property acquisition, but it is important to consider the bank’s property requirements. By avoiding the purchase of problematic or illiquid properties, you increase your chances of obtaining a mortgage and successfully completing the transaction.
Please note that these recommendations are based on the general experience of real estate sales specialists. For specific information on a particular property, it is recommended to contact banks directly for personalized advice.
Read also:
