Cyprus has seen an increase in net demand for business loans for the first time since the end of the pandemic.
The island nation's central bank announced this on Tuesday, July 1.
According to the main financial institution in Cyprus, this trend indicates entrepreneurial activity and investor confidence in the local economy. The revival in demand is linked to two key factors: stabilized interest rates and businesses' increased need to invest in fixed capital. Against the backdrop of a gradual economic recovery, companies are looking to the future with greater confidence, as reflected by the growth in loan applications.
In the housing loan sector, however, the dynamics were more subdued, with household interest in mortgage loans remaining at the previous quarter's level. Despite more attractive lending terms and lower interest rates, banks continue to report stable but not growing demand.
Against this backdrop, the downward trend in the consumer segment continues, with demand for personal loans declining for the second consecutive quarter. Experts attribute this decline to a modest decrease in spending on durable goods and an increased interest in alternative financing sources, such as online lenders and microfinance organizations.
Nevertheless, banks expect a revival in corporate lending and growth in demand for mortgage loans in the second quarter of 2025. As for consumer and other loans, market participants estimate that demand will remain stable.
Despite positive shifts in demand, credit standards in Cyprus remained unchanged.
Lending conditions for businesses and households were stable and tight in the first quarter of 2025.
Notably, banks did not relax their requirements for borrowers despite increased competition in the sector and preliminary expectations of a more flexible policy.
Thus, corporate lending criteria remained tight for the third consecutive quarter and housing loan conditions remained tight for the fifth consecutive quarter. Contrary to forecasts of possible liberalization, consumer loans also showed no change in conditions. As the study emphasizes, the impact of the key factors that determine credit standards was generally neutral; none of these factors pressured banks to change their policies.
According to the Central Bank's forecasts, the structure and criteria of credit policy will remain unchanged for businesses and individuals in the second quarter of 2025. Market participants do not expect major changes in borrower assessment or application approval procedures in the short term.
Consequently, Cyprus is entering the second half of 2025 with signs of recovery in the real economy and a gradual restoration of confidence among businesses and households. These developments pave the way for increased lending activity, provided the macroeconomic environment remains stable and monetary policy remains predictable.