In July 2026, the cost of new loans for property purchases in Cyprus decreased. According to the Central Bank, the average interest rate on new housing loans stood at 3.78%, compared with 4.04% a month earlier.
Mortgage rates in Cyprus therefore remain broadly comparable with the median level in the euro area. For new loans for house purchases, the difference from the euro area’s weighted average rate was -0.2 percentage points, meaning that the Cyprus figure was slightly below the median.
The Central Bank notes that the average rate on housing loans can change not only because of banks’ decisions. The loan portfolio includes different types of borrowing — for example, loans for primary residences and holiday homes — which carry different levels of risk and interest rates. As a result, changes in the composition of newly issued loans from month to month can also affect the overall figure.
By comparison, consumer loans in Cyprus became more expensive in July: the average rate increased to 6.94% from 6.5% in June. Loans to non-financial corporations of up to €1 million also became more expensive, with the rate rising to 4.47% from 4.32%. For loans exceeding €1 million, the rate increased to 4.29% from 4.07% a month earlier.
Deposit rates in Cyprus are the lowest in the euro area
The situation with bank deposits is completely different. The Central Bank of Cyprus notes that deposit rates remain the lowest in the euro area. In July, the rate on household deposits with an agreed maturity of up to one year fell to 1.27%, compared with 1.42% in June. For non-financial corporations, by contrast, the rate increased from 1.41% to 1.56%.
According to the Central Bank, one of the reasons is the very high liquidity of the Cyprus banking system. In July 2026, the liquidity coverage ratio (LCR) in Cyprus stood at 319%. By comparison, the median figure in the EU was 189%, while the average was 158% in March 2026, according to the latest available data. Interest rates are also affected by the relatively small size of the Cyprus banking market. As a result, competition for deposits remains limited, which is reflected in the returns offered on savings.
The situation with new deposits is practically the same as with existing ones: the Central Bank believes that rates on new deposits also remain low for the same structural reasons.
Cyprus banks are gradually changing lending conditions
The Central Bank of Cyprus also analyses how quickly banks pass changes in key interest rates on to lending and deposit rates. Overall, the dynamics in Cyprus for existing loans are close to those observed in other euro-area countries. The situation for new housing loans is also broadly comparable with the euro area. However, for loans to non-financial corporations, the pass-through of interest rate changes is weaker both during periods of rate increases and rate cuts.
In the euro area, the average rate of pass-through during the period of monetary policy tightening was 35.1% higher than during the easing period for new housing loans and 17.3% higher for corporate loans. In Cyprus, the difference was only 1.3% for households. For non-financial corporations, by contrast, the pass-through rate during the tightening period was 12.6% lower than during the easing period.
The structure of new mortgage lending is also changing. The share of housing loans with variable interest rates fell from almost 100% at the beginning of 2022 to 12.1% in July 2026. This is below the median level in the euro area. The Central Bank links this trend, among other factors, to the growing use of loans with fixed interest rates for the first few years — for example, for 3–5 years — after which the rate may switch to a variable basis.
For new loans to households and non-financial corporations overall, the share of loans with variable rates also fell from almost 100% at the beginning of 2022 to 56.1% in July 2026. According to the regulator, this reflects a change in borrowers’ attitudes towards interest rate risk.
New lending in Cyprus fell sharply
Despite the decline in mortgage rates, the volume of new lending fell noticeably in July to €415 million, compared with €626.2 million in June. The total value of new loan agreements, including renegotiated contracts, declined to €686.1 million from €831.3 million a month earlier. By category, the figures were as follows:
- pure new consumer loans — €23.9 million, compared with €25.1 million in June;
- pure new housing loans — €149.5 million, compared with €152.1 million;
- corporate loans of up to €1 million — €52.3 million, compared with €54.5 million;
- corporate loans exceeding €1 million — €162.3 million, compared with €387.5 million.
The final category recorded the most significant decline and was one of the main factors behind the overall drop in new lending. The Cyprus banking system continues to hold a substantial volume of deposits. In July 2026, total deposits increased by €562.3 million, while the annual growth rate reached 6.2%. Total deposits amounted to €59.2 billion. Total loans reached €28.3 billion, while the annual growth rate stood at 11.1%.
At the same time, the European Central Bank kept its three key interest rates unchanged in July: the deposit facility rate at 2.25%, the main refinancing operations rate at 2.40%, and the marginal lending facility rate at 2.65%. For residents of Cyprus, this creates a mixed picture: mortgage loans are becoming more affordable, while returns on bank deposits remain among the lowest in the euro area, and the overall volume of new lending fell significantly in July.