The Central Bank of Cyprus has published a new report on bank lending, showing that in the second quarter of 2025 net demand for loans grew both from businesses and households. The strongest increase was in demand for mortgages, directly linked to the revival of the real estate market and rising consumer confidence.
According to the report, companies are actively borrowing not only to replenish working capital and build up inventories but also for long-term development investments. For families, mortgage demand is driven by lower interest rates and expectations of further increases in property prices, motivating buyers to purchase real estate now.
Lending Conditions: Stability for Households, Changes for Businesses
In the second quarter of 2025, lending conditions remained broadly unchanged compared to the previous period. This applied to both mortgages and consumer loans for households, as well as corporate loans.
However, many banks warn that the situation may change in the third quarter: stricter criteria are expected for corporate borrowers. For households, by contrast, standards will remain unchanged, creating favorable conditions for families planning major purchases.
Falling Interest Rates and Growing Competition
An important trend is the decline in interest rates on new loans. For businesses, this is due to stronger competition among banks and lower perceived risk in a relatively stable economic environment. Similar processes are observed in the mortgage segment, where banks are cutting margins to attract more clients, making home loans more affordable. This supports growth in the construction sector and fuels further demand for apartments and houses in Cyprus.
Outlook for Q3 2025
Banks expect demand for loans to remain high in the coming months. Business demand is likely to stay stable, while household demand — especially for mortgages and consumer loans — is projected to grow further.
This trend is largely explained by low interest rates, improving real estate expectations, and public confidence in the country’s economic prospects. At the same time, companies will face stricter requirements when applying for credit, which may limit their ability to secure rapid financing.
Prospects for Cyprus’s Economy
The growing demand for loans can be seen as a sign of economic recovery. For households, it is an opportunity to improve housing conditions and living standards, while for businesses, it provides the means to expand production and invest in new projects.
However, banks’ cautious stance toward corporate borrowers indicates that the financial sector is carefully monitoring the sustainability of growth. If positive trends in the real estate market continue and macroeconomic indicators stabilize, Cyprus can expect further investment growth and a stronger position as an attractive destination for both living and doing business.