On Thursday, 10 September, the European Central Bank decided to raise its key interest rates by 25 basis points. The changes will take effect on 16 September 2026. As a result, the main refinancing rate increased to 2.65%, the deposit facility rate to 2.5%, and the marginal lending facility rate to 2.9%. The ECB explained that this monetary policy decision is aimed at ensuring a sustainable return of inflation to its 2% target.
Notably, this is the second time the ECB has raised interest rates after a long pause. In June, it increased rates by 25 basis points for the first time since September 2023. ECB President Christine Lagarde said at a press conference that the decision to raise rates was “completely obvious” and was taken unanimously by the bank’s leadership. However, she said the future path of interest rates was not discussed, and the regulator will continue to base its decisions on incoming economic data.
How the increase will affect mortgages in Cyprus
For residents of Cyprus, the ECB’s decision is particularly important because of its potential impact on bank lending. Higher key interest rates increase banks’ funding costs, which may gradually be reflected in lending rates. This primarily affects variable-rate mortgages, where monthly repayments may increase in line with changes in the underlying benchmark rate.
For new buyers, this means a higher cost of financing. Those planning to purchase property with a loan should now compare bank offers more carefully and take into account possible changes in monthly repayments. At the same time, an ECB rate increase does not mean that all mortgage rates in Cyprus will automatically rise by the same amount: the final rate depends on the terms offered by the individual bank, the type of loan and the benchmark index used.
What will happen to the Cyprus property market
More expensive mortgages generally reduce housing affordability for buyers who rely on bank financing. This may lead some buyers to act more cautiously and take longer to make a purchase decision.
However, the Cyprus property market is entering this period with relatively strong demand. During the first eight months of 2026, 13,288 property sale agreements were registered on the island, which was 13.7% more than during the same period last year. Therefore, a single ECB rate increase is unlikely to automatically cause a sharp fall in prices. Market trends are also influenced by the supply of new housing, rental costs, demand from foreign buyers and household income conditions.
The ECB’s September decision therefore becomes another factor affecting the Cyprus property market. Buyers will now need to take into account not only property prices, but also the cost of borrowing when calculating the real budget for a transaction.