The Central Bank of Cyprus has published a new report analysing the interest of local residents and businesses in applying for loans.
It should be noted that the conclusions of the main banking institution of the island state were made on the basis of data for the first quarter of 2024.
As it turned out, the interest in the registration of loans in the island state has grown 2 times. Total new loans from January to March 2024 rose by 17.9 per cent to €785 million, compared to €666 million in the same period in 2022. However, total loans fell by 7.6 per cent compared to 2019.
New loans to local households increased by 48.8 per cent to €323 million from €217 million in 2023 and by 9.6 per cent compared to 2019. In turn, new loans to businesses increased by 3.1 per cent to € 462 million from € 448 million in 2023. Compared to 2019, loans in this category decreased by 16.7 per cent.
Interestingly, despite the above figures, experts say that the demand for loan processing (especially among commercial companies) is decreasing. At the same time, they expect a surge in interest from borrowers following the interest rate cuts predicted for this summer. In their view, increased economic uncertainty caused by repeated interest rate rises and economic tensions caused by events in the international environment are having the greatest impact on demand for mortgage loans.
Despite the growth in the volume of new loans, the overall pace of loan restructuring is slowing.
Thus, in the first quarter of 2024, household restructurings accounted for EUR 190 million, while corporate restructurings accounted for EUR 559.7 million.
As a reminder, a restructuring is a change in the terms of an existing loan. The loan agreement remains in force and all issues are resolved within the organisation that issued the loan. It cannot be transferred to another bank. This programme aims to improve the financial situation of the borrower who has had difficulties in repaying the debt.
Restructuring is carried out according to one of the following options:
- Reduce the interest rate - each month the debtor will spend less on servicing the loan;
- "Stretching" the term of the loan - the term is extended, but the amount of monthly payments on the loan is reduced;
- Give the borrower a credit holiday - for some time it is possible to pay only the interest on the loan;
- You can pay only the interest on the loan;
- Write off the accrued interest.
It is important: the terms of the loan are not fundamentally better - for the debtor it is only an opportunity to "take a break", to avoid a difficult situation, not to spoil relations with the creditor. Banks agree to restructuring in order to avoid being saddled with bad debts and to get their money without having to go to court and seize property.