At the end of 2025, the banking system of Cyprus demonstrated rare stability: borrower requirements and overall lending conditions remained unchanged. This is evidenced by data from the bank lending survey published by the country’s Central Bank. For several consecutive quarters, banks have adhered to the same policy, maintaining fairly strict standards that were previously established.
For businesses, these conditions have not changed for a year and a half, and for individuals — even longer. This indicates that financial institutions continue to cautiously assess risks and are not rushing to ease requirements, despite the gradual recovery of the economy.
Interest rates and bank competition
An interesting trend is observed in the business lending segment. Here, for the third consecutive quarter, interest rates and bank margins have been decreasing. The main reason is increased competition between banks, as well as a more optimistic assessment of risks by financial institutions.
At the same time, in the mortgage lending market, competitive pressure is hardly felt. Banks are not actively striving to compete for customers, which keeps conditions at the same level.
Loan demand: unexpected growth
If stability is observed on the banks’ side, customer behavior is changing. Companies, contrary to expectations, did not increase borrowing volumes, and demand from businesses remained at the same level. Meanwhile, households have begun taking loans much more actively. This is especially true for mortgages. The growth in interest in housing loans is explained by lower interest rates, improved consumer sentiment, and positive expectations in the real estate market.
An even more pronounced increase has been recorded in the consumer loan segment. Residents of Cyprus have begun to spend more frequently on large purchases — household appliances, cars, and other durable goods, which has driven demand upward.
Application approvals and outlook for 2026
The share of rejected loan applications has remained stable for several consecutive quarters. This means that banks are neither tightening nor easing their policy — decisions are made based on the same criteria as before. At the beginning of 2026, the outlook also appears calm. Banks do not expect significant changes either in lending conditions or in demand levels. This indicates that the market is entering a phase of equilibrium after a period of instability in previous years.
The current situation creates a relatively predictable environment for those planning to take a loan in Cyprus. On the one hand, conditions remain strict but clear. On the other hand, declining rates in certain segments and increased consumer activity open up new opportunities.
Experts note that in 2026 much will depend on the global economic situation, the policy of the European Central Bank, and inflation. If the trend toward lower rates continues, the lending market may receive an additional boost, especially in the areas of mortgages and consumer loans.