At the beginning of 2026, Cyprus’s banking sector maintained strong lending activity despite regional instability and caution among businesses. According to the Central Bank of Cyprus, from January to March, the volume of net new loans exceeded €1 billion and reached €1.071 billion. Although this is 12.3% lower than in the same period of 2025, the market continues to show resilience, especially in the mortgage lending segment.
Mortgage Lending in Cyprus Continues to Grow
Housing loans remain the main driver of the credit market. Against the backdrop of strong demand for real estate and active construction, the volume of new mortgage loans increased noticeably. In the first three months of 2026, banks issued €353.6 million in mortgage loans, compared with €284.1 million a year earlier.
The growing interest in buying property is linked to several factors at once. Cyprus continues to see strong demand from both local residents and foreign buyers. The real estate market is developing particularly actively in Limassol, Larnaca, and Paphos, where construction of new residential complexes and investment projects continues.
The gradual decline in eurozone interest rates after the period of tight monetary policy by the European Central Bank is also having an additional impact. This is making mortgages more accessible for families and investors. Overall, net new loans to households increased to €437 million, up 17.7% compared with the first quarter of last year.
Consumer Loans Remain Stable
Consumer lending on the island is showing more restrained dynamics. From January to March, the volume of new consumer loans amounted to €63.6 million, compared with €67.3 million a year earlier. Economists explain this by the caution of households against the backdrop of the high cost of living, rising utility prices, and persistent inflation. At the same time, other types of loans to individuals remained virtually unchanged, holding at around €19.4 million.
Businesses Are Taking Out Fewer Large Loans
In the corporate sector, the situation looks less optimistic. The total volume of new business loans decreased to €635 million, compared with €851 million a year earlier. The decline amounted to 25.4%. The number of large loans exceeding €1 million fell especially noticeably. Their volume decreased from €730.8 million to €492.3 million. Experts link this to companies’ caution amid geopolitical tensions in the Middle East and the high cost of financing for major projects.
At the same time, small and medium-sized businesses are showing activity. Loans to companies of up to €1 million increased to €142.3 million, compared with €120.4 million a year earlier. This indicates that smaller enterprises continue to invest in development and adapt to new economic conditions.
Banks Sharply Increased Lending in March
Despite the overall decline in quarterly figures, March 2026 was especially active for the banking sector. The volume of net new loans rose to €495.3 million, compared with €328.7 million in February.
The total volume of new loans reached €730.4 million. Mortgage loans increased to €142.8 million during the month, while consumer loans rose to €24.6 million.
Business lending also revived. Large corporate loans exceeding €1 million almost doubled, reaching €266.9 million compared with €137.3 million a month earlier.
Analysts note that even the tense geopolitical situation in the region has not stopped lending activity in Cyprus. Banks continue to actively finance both households and businesses.
Loan Restructuring Has Declined in Cyprus
At the same time, banks are recording a decrease in loan restructuring volumes. This is considered a positive signal for the country’s financial system. Among households, the volume of renegotiated loans fell to €133.6 million, compared with €210.9 million a year earlier. Mortgage restructurings decreased from €188.8 million to €125.1 million.
In the corporate sector, the volume of renegotiated loans also declined, reaching €456.4 million compared with €487.3 million in the first quarter of 2025. Experts believe the reduction in restructuring indicates a gradual improvement in the solvency of households and businesses after difficult years of high interest rates and inflationary pressure.
What Is Happening in Cyprus’s Banking Market
Cyprus’s financial sector continues to adapt to new economic realities. Banks remain cautious when issuing large corporate loans, but the real estate market and mortgage lending continue to support credit activity.
Against the backdrop of continued housing price growth and the inflow of foreign investment, demand for mortgages is likely to remain high in the second half of 2026 as well. However, experts warn that much will depend on the future policy of the European Central Bank, the level of inflation, and the overall stability of the regional economy.