It took only three years for borrower habits in Cyprus to change dramatically. The dominance of floating-rate loans has become a thing of the past, while mortgage and business loans with fixed interest rates have moved to the forefront. A decisive role was played not only by customer preferences but also by active bank policies, as institutions began promoting fixed-rate products against the backdrop of European Central Bank decisions to raise key rates to curb inflation. As a result, borrowers today can “lock in” their monthly payments for 3, 5, or 10 years and avoid dependence on rate fluctuations driven by ECB monetary policy.
Business loans: a sharp shift toward fixed rates
According to data from the Central Bank of Cyprus published in the Economic Bulletin, a noticeable shift has occurred in the corporate lending segment. The share of business loans with fixed interest rates increased from a symbolic 1% in 2022 to 35% in the period from January to October 2025. At the same time, the share of floating-rate loans decreased from 99% to 65%.
The Central Bank emphasizes that this dynamic reflects companies’ desire for greater predictability in financing costs. This is especially relevant in an unstable macroeconomic environment and amid rising energy and raw material costs in Europe. Against this background, the average interest rate on new business loans in Cyprus decreased significantly: from 5.4% in June 2024 to 3.6% in October 2025. The total reduction amounted to 184 basis points, exceeding the comparable reduction of 162 basis points in the eurozone median.
Experts link this to the fact that a significant portion of new business loans in Cyprus remains short-term and tied to the Euribor interbank rate, enabling banks to react quickly to ECB decisions.
Convergence with the eurozone and narrowing of the gap
The significant decline in rates led to the effective alignment of corporate lending conditions in Cyprus with pan-European indicators. By October 2025, the rate on new business loans reached 3.6%, almost matching the eurozone median of 3.5%. The difference, which at its peak reached 1.7 percentage points, narrowed to a minimal 0.1%. This strengthened the attractiveness of the Cypriot financial market for investment and business refinancing in euros.
Mortgages: fixed rates become the new standard
Even more noticeable changes occurred in the mortgage lending market. The share of short-term new mortgages with floating rates dropped on average from 95% in 2022 to 21% during the period from January to October 2025. At the same time, the issuance of fixed-rate mortgages with medium-term maturities from 1 to 5 years increased sharply, often at more attractive interest rates.
This category became the largest by volume of new issuances, accounting for 64% of the mortgage market between January and October 2025. According to the Central Bank, such trends reflect households’ desire to minimize interest rate risk and plan family budgets in advance. Since May 2025, mortgage rates in Cyprus have also shown steady convergence with eurozone figures, decreasing to 3.1% in October 2025 compared to a eurozone median level of 3.4%.
The other side of stability and deposits
Despite all the advantages of fixed rates, there is also a long-term effect. The growth of their share means that future ECB monetary policy decisions will be transmitted more slowly into the economy, since a significant part of the loan portfolio does not immediately react to rate changes.
The deposit market also deserves special attention. During the ECB’s monetary easing period from June 2024 to June 2025, rates on new loans declined actively, while yields on new deposits adjusted much more slowly. This is explained by the fact that at the start of the easing cycle deposit rates were already at low levels due to high excess liquidity in the banking system. As a result, the gap between borrowing costs and deposit returns in euros remains, becoming an important factor when choosing financial strategies for businesses and individuals.
Overall, the shift toward fixed interest rate loans became a key trend of 2025. It increases borrowers’ financial stability but simultaneously changes the mechanism through which ECB decisions affect the economy, shaping a new reality for the banking sector and the euro-denominated lending market.