Despite the gradual increase in interest rates on bank deposits, Cyprus still ranks last in the eurozone in terms of deposit returns. This is according to data from the Central Bank of Cyprus (CBC) for June 2026.
At the same time, mortgage rates continue to decline, while the volume of new lending increased significantly in June. Experts attribute the situation to the high liquidity of the banking system and limited competition in the local market.
Deposit rates in Cyprus remain the lowest in the eurozone
In June 2026, the interest rate on household fixed-term deposits of up to one year increased to 1.42%, compared with 1.25% a month earlier. Rates on deposits for non-financial companies also increased, from 1.31% to 1.41%. However, despite the increase, the Central Bank emphasises that deposit rates in Cyprus remain the lowest among all eurozone countries. Record liquidity in the banking sector is cited as the main reason. The Liquidity Coverage Ratio (LCR) reached 310% in June 2026. For comparison:
- the median rate in the eurozone is 189%;
- the European Union average is 158% (based on data for March 2026).
Due to the abundance of available funds, banks have little need to attract new deposits by offering higher interest rates. Another factor is the relatively small size of the Cyprus banking market, where competition is lower than in larger eurozone countries. According to the Central Bank, changes in the European Central Bank's key interest rates have a significantly weaker impact on deposit products offered by Cypriot banks than in most other eurozone countries.
Mortgages are becoming slightly cheaper, while corporate loans are getting more expensive
Against the backdrop of a gradual easing of monetary policy, interest rates on certain types of loans continue to decline. In June 2026:
- the interest rate on consumer loans decreased from 6.95% to 6.5%;
- the mortgage interest rate decreased from 4.06% to 4.04%.
At the same time, the cost of business loans increased slightly:
- loans to companies of up to €1 million — 4.32%, compared with 4.27% a month earlier;
- loans of more than €1 million — 4.07%, compared with 3.85%.
The Central Bank notes that interest rates on new mortgages in Cyprus are now almost in line with the eurozone average and are even around 0.2% below the median rate. For corporate loans, rates are approximately 0.3% above the eurozone median.
Cyprus residents increasingly choose fixed-rate mortgages
One of the most notable trends in recent years has been a change in borrowers' preferences. While at the beginning of 2022 almost 100% of new mortgages were issued with variable interest rates, by June 2026 their share had fallen to 10.9%. More and more homebuyers are choosing loans with fixed rates for the first 3–5 years to protect themselves against potential interest rate fluctuations.
Overall, the share of new variable-rate loans for households and businesses has also fallen significantly — from almost 100% at the beginning of 2022 to 69.1%, bringing it in line with the eurozone average. According to the Central Bank, this trend indicates that borrowers have become more attentive to interest rate risks, while banks need to take this into account when developing new lending products.
Volume of new lending rises sharply
In June 2026, Cyprus banks significantly increased lending to the economy. The total volume of new loans amounted to €831.3 million, of which €626.2 million represented pure new lending. By comparison, a month earlier, pure new lending amounted to €361.9 million, while the total volume of loans issued stood at €594.5 million.
The most notable changes were:
- consumer loans — €25.1 million (compared with €23.9 million a month earlier);
- mortgage loans — €152.1 million (compared with €145.5 million);
- loans to companies of up to €1 million — €54.5 million (down from €63.4 million);
- loans to companies of more than €1 million — €387.5 million, significantly higher than the May figure of €121.5 million.
Experts believe that the increase in lending reflects continued strong demand for financing from businesses and property buyers. The future direction of interest rates in Cyprus will largely depend on decisions by the European Central Bank, inflation levels in the eurozone and competition among local banks for new customers.