New mortgage lending in Cyprus rose sharply in May 2026, highlighting continued demand for housing finance despite elevated borrowing costs. Net new housing loans increased to €145.5 million from €106 million in April, according to the Central Bank of Cyprus.
Overall Lending Gains Momentum
Net new lending across all categories reached €361.9 million in May, up from €331.3 million a month earlier, reflecting stronger credit activity among both households and businesses.
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Mortgage Rates Continue To Rise
The average interest rate on new housing loans increased to 4.06% in May from 3.73% in April, as demand for residential financing remained resilient despite higher borrowing costs.
Consumer And Small Business Lending Expand
Consumer lending also strengthened, with new loans rising to €23.9 million from €21.8 million in April.
Lending to non-financial corporations for amounts up to €1 million climbed to €63.4 million from €39.4 million, while loans exceeding €1 million declined to €121.5 million from €156.8 million, pointing to softer activity among larger corporate borrowers.
Borrowing Costs Show Mixed Trends
Interest rates moved in different directions across lending categories. Consumer loan rates eased to 6.95% from 7.19%, while rates on business loans of up to €1 million edged higher to 4.27%. The average rate on loans above €1 million fell to 3.85%.
Deposit rates also increased modestly. One-year household time deposits rose to 1.25% from 1.20%, while comparable deposits for non-financial corporations increased to 1.31% from 1.23%.
Deposit Rates Remain Among The Eurozone’s Lowest
According to the Central Bank of Cyprus, lending rates remain broadly in line with the euro area median. Deposit rates, however, continue to rank among the lowest in the eurozone, reflecting the banking sector’s strong liquidity position.
Borrowers Shift Toward Fixed-Rate Mortgages
Borrowers continued to favour longer fixed-rate mortgages in May. Loans with variable rates or an initial fixed-rate period of up to one year accounted for 17.8% of new housing lending, down from almost 100% at the beginning of 2022.
The shift reflects a growing preference for payment certainty as households adapt to a higher interest-rate environment.
