Consumer Loans Drop Sharply in Cyprus

На Кипре падает спрос на потребительские кредиты
22 March 2021 Liza Medvetskaya

The demand for consumer loans in Cyprus continues to be significantly lower than last year's figures.

Thus, the volume of new consumer loans issued in January 2021 by local banks decreased to EUR 11.6 million, compared with EUR 20.3 million in December 2020.

In total, the volume of new consumer loans in 2020 decreased to EUR 149.3 million from EUR 161.2 million in 2019 and EUR 161.8 million in 2018.

Even if the borrowers have the ability to take out good loans, they are in no hurry to spend it on the purchase of new cars or other consumer goods.

A significant role in this situation is played not only by the uncertainty in the future because of the coronavirus pandemic, but also by the tightening of borrowers requirements, as well as an increase in interest rates on loans.

According to the latest data from the Central Bank, the interest rate on consumer loans rose in January 2021 to 3.25%, up from 2.99% in the previous month.

It should be noted that at the same time the banks are much more willing to reduce interest on deposits.

In light of these developments, many of the country's financial institutions are now paying more attention to mortgages. In turn, thanks to subsidized interest rates by the state, borrowers prefer to invest their savings in the purchase of housing.

Cyprus banks are actively promoting mortgage lending among young couples, as this is a new segment of clients who are not burdened with other obligations.

The interest of young people is focused not only on buying small apartments, but also houses. The demand from young couples keeps the Cyprus property market relatively stable, and also gives banks the opportunity to reduce some of the excess liquidity.

На Кипре падает спрос на потребительские кредиты

As you may know the mortgage subsidy program was launched in Cyprus at the end of June 2020.

It is attended by a number of large financial institutions of the island, including Ancoria Bank, Astrobank, Hellenic Bank, CDB Bank, Bank of Cyprus, RCB Bank, Alpha Bank Cyprus, National Bank of Greece, Eurobank Cyprus, as well as the state Housing Finance Corporation.

The subsidy covers mortgage loans taken from March 1, 2020 from a credit institution that participates in the program, as well as loans for the purchase or construction of basic housing. An obstacle to applying is participation in other government programs to subsidize interest on loans. The size of the mortgage loan cannot exceed EUR 300 thousand.

Since the launch of the program, the banks of Cyprus have already issued more than 2.5 thousand mortgage and business loans worth more than EUR 350 million.

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