On Wednesday, 25 September, the Central Bank of Cyprus published a report entitled ‘Bank Lending Survey’.
The document reflects information on the demand for loans from local businesses and households, as well as on the rules of their issuance.
In particular, according to the study of the main financial institution of the island state, in the second quarter of 2024, interest in business loans in Cyprus remained unchanged. At the same time, demand for consumer loans and mortgage lending fell sharply.
In terms of demand for business loans, the negative impact of the general level of interest rates and the lower financing needs for mergers, acquisitions and restructuring were offset by an increase in the financing needs of businesses for both fixed investment and inventories and working capital. As for households, the decline in net demand for housing, consumer and other types of credit was attributed to higher interest rates, low confidence in banks, and lower spending on consumer durables. At the same time, demand for various types of loans from both businesses and households is expected to be stable in the third quarter of 2024.
As for the criteria for granting new loans, for business loans in the second quarter of 2024 compared to the previous quarter, they have tightened considerably.
This was mainly due to a reduction in banks' tolerance to potential risks. In contrast, the criteria for personal loans, both housing and consumer loans, remained unchanged in the second quarter of 2024 compared with the previous quarter. Meanwhile, the general terms and conditions for new loans or lines of credit to small businesses remained unchanged in the second quarter of 2024 after seven consecutive quarters of tightening.
Overall terms for new mortgage lending eased in the second quarter of 2024 compared with the previous quarter, and for the first time since the first quarter of 2018, due to competitive pressures. In particular, there were reductions in interest rates on new mortgage loans and in banks' margins on traditional new mortgage loans. In contrast, the general terms and conditions of new consumer and other loans to households remained unchanged, although there was a decline in interest rates on these loans, according to the survey. According to banks' expectations for the third quarter of 2024, lending criteria for both business and personal loans will remain unchanged from the previous quarter.