Despite a gradual convergence of financial indicators, Cyprus’s banking sector continues to show significant differences from the rest of the eurozone in both deposit and lending rates. According to data published by the Central Bank of Cyprus, local savers continue to receive lower returns on their deposits, while borrowers in many cases pay higher interest rates than residents of other countries within the monetary union.
Experts note that the gap has begun to narrow in recent months following the European Central Bank’s decisions to reduce benchmark interest rates. Nevertheless, Cyprus remains among the eurozone countries where deposit yields are noticeably below the average.
Deposit Rates in Cyprus Lag Behind the Eurozone
The most significant difference remains in the segment of new household term deposits with maturities of up to one year. The average rate in Cyprus stands at 1.2%, compared with a eurozone average of 1.89%.
Among Cypriot banks, the highest rate in this category is offered by the National Bank of Greece at 1.55%, while the lowest is provided by Bank of Cyprus, where returns amount to just 0.82%.
A similar situation can be observed in new term deposits for non-financial corporations with maturities of up to one year. The average rate in Cyprus stands at 1.23%, lower than both the previous month’s figure of 1.39% and the eurozone average of 1.98%.
Ancoria Bank offers the most attractive conditions for corporate clients, with a rate of 1.64%, while the Housing Finance Corporation provides the lowest return at 0.78%.
Existing Deposits Generate Even Lower Returns
The gap is particularly noticeable in the segment of existing household deposits with maturities of up to two years. The average rate stands at just 0.77%, virtually unchanged from the previous two months, when it remained at 0.76%.
For comparison, the average rate on similar deposits across the eurozone is 1.72%.
The highest return is offered by Jordan Kuwait Bank at 1.56%, while Bank of Cyprus offers only 0.51%. Meanwhile, Central Cooperative Bank and First Investment Bank continue to maintain zero interest rates on certain products within this category.
In the segment of existing deposits held by non-financial corporations with maturities of up to two years, the average rate stands at 1.16%. This is higher than February’s 1.05% but slightly below March’s 1.19%.
Nevertheless, it remains significantly lower than the eurozone average of 2.04%. The National Bank of Greece offers the highest return in this segment at 1.48%, while Societe Generale records the lowest rate at 0.75%.
Mortgages in Cyprus Are Cheaper Than New Mortgages Across the Eurozone
Unlike deposits, the situation for new home loans is more favorable for Cypriot borrowers. The average rate on new mortgages reached 3.1% in April. For comparison, the figure stood at 3.04% in February and 3.09% in March.
The average mortgage rate across the eurozone is 3.45%, making new housing loans in Cyprus more affordable than in many other European countries.
The lowest rate is offered by the Cyprus Development Bank at 2%, while the highest is recorded at Ancoria Bank at 3.44%.
Analysts attribute this trend to strong competition among banks for high-quality borrowers and the gradual recovery of the property market following a period of elevated interest rates.
Business Loans Remain Expensive
For companies, borrowing costs remain relatively high. The average interest rate on new loans of up to €1 million granted to non-financial corporations stands at 4.17%.
The most competitive offer in this category comes from Ancoria Bank at 3.15%, while the highest rate is charged by Banque SBA at 6.8%.
For loans exceeding €1 million, the average rate is 3.83%. The lowest rate is available from Alpha Bank at 3.52%, while the highest is recorded at Bank of Cyprus at 4.40%.
Holders of Existing Mortgages Continue to Pay More Than Their European Counterparts
Despite the improvement in rates for new loans, borrowers with existing mortgage agreements in Cyprus continue to face higher interest costs than residents of the wider eurozone.
The average rate on outstanding mortgages with maturities exceeding five years stands at 3.48%. The figure was 3.5% in February and remained at 3.48% in March.
By comparison, the average rate for similar loans across the eurozone is 2.46%.
The lowest rates on existing mortgages are offered by the Housing Finance Corporation at 2.91%, while the highest remain with Bank of Cyprus at 3.71%.
A similar picture can be seen in the corporate lending segment. The average rate on existing loans to non-financial companies with maturities exceeding five years stands at 4.07%, compared with 4.06% in February and 4.05% in March.
For comparison, the eurozone average is 3.09%. The lowest rate in this category is offered by Eurobank at 3.83%, while the highest reaches 4.99% at Societe Generale.
What This Means for Cyprus Residents
The latest figures confirm a trend that has frustrated depositors in Cyprus for several years. Despite interest rate cuts by the European Central Bank and the gradual alignment of financial conditions across the eurozone, Cypriot banks continue to offer significantly lower returns on deposits than the European average.
At the same time, conditions in the lending market are gradually improving. New mortgages in Cyprus are now cheaper than the eurozone average, although holders of older loans and business borrowers continue to face relatively high financing costs.
Economists expect that future decisions by the European Central Bank, combined with increasing competition among local banks, could contribute to a further convergence of rates in the coming months.
For now, however, Cyprus remains one of the eurozone countries where savers earn comparatively low returns on their deposits, while many borrowers continue to pay above-average interest rates for financing.