Cyprus' mortgage market continues to show strong growth. According to the Central Bank of Cyprus, the volume of new home loans increased significantly in May 2026, reflecting sustained demand for residential property from both local residents and international buyers.
During the month, the total value of new loans reached €361.9 million, compared to €331.3 million in April. The strongest growth was recorded in mortgage lending in Cyprus. Banks issued €145.5 million in home loans in May, a substantial increase from €106 million in April. Experts note that buyer activity continues to be supported by a resilient property market, strong demand for newly built homes, and the ongoing inflow of foreign investors, particularly in Limassol, Paphos, and Larnaca.
Mortgage rates rise again
At the same time, interest rates on new mortgage agreements also increased. The average interest rate on housing loans rose to 4.06% in May, up from 3.73% a month earlier. Despite the higher borrowing costs, mortgages in Cyprus remain relatively competitive by European standards. According to the Central Bank, the average rate on new home loans is still around 0.2 percentage points below the eurozone median.
Financial analysts point out that following a series of European Central Bank interest rate decisions, banks continue to gradually adjust the pricing of new loans. Nevertheless, the Cypriot mortgage market remains stable.
Which types of loans became more popular?
The increase in lending was not limited to mortgages. New consumer loans rose to €23.9 million, compared with €21.8 million a month earlier. Lending to small and medium-sized businesses also grew significantly. New business loans of up to €1 million reached €63.4 million, compared with €39.4 million in April. Meanwhile, the large corporate lending segment moved in the opposite direction, with new loans exceeding €1 million declining from €156.8 million to €121.5 million.
Changes were also seen across other banking products. Interest rates on consumer loans fell from 7.19% to 6.95%, providing welcome relief for borrowers. The average rate for business loans of up to €1 million increased slightly from 4.20% to 4.27%, while borrowing costs for large corporate loans declined from 4.08% to 3.85%.
According to economists, these developments reflect the banking sector's ongoing adjustment to the European Central Bank's monetary policy and the current economic environment across the eurozone.
More borrowers are choosing fixed-rate mortgages
One of the most significant trends in recent years has been the changing preferences of homebuyers. At the beginning of 2022, almost 100% of new mortgages were issued either with variable interest rates or fixed rates lasting less than one year. By May 2026, that share had fallen to just 17.8%. This means that the majority of borrowers now prefer mortgages with fixed interest rates during the initial years of repayment. Such an approach provides protection against potential future increases in borrowing costs while allowing households to plan their finances more effectively.
The continued growth in mortgage lending demonstrates that Cyprus' property market remains highly active despite more expensive financing. Newly built apartments, owner-occupied homes, and investment properties in the island's tourist regions continue to attract particularly strong demand.
Experts expect demand for property purchases to remain strong throughout the second half of 2026, supported by a stable economy, ongoing infrastructure development, robust demand from foreign buyers, and the continued construction of new residential projects. However, prospective buyers are advised to compare mortgage offers carefully, as the terms for fixed and variable interest rates can vary considerably depending on the loan term and the size of the down payment.