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High Interest Rates Continue To Put Pressure On Loan Demand

by THEFUTURE.TEAM

June 14, 2024

Loan demand continued to decline in the first quarter of 2024, with banks attributing the decline to high interest rates, while the terms and conditions for granting loans to businesses became tighter in the first quarter of 2024 after three consecutive quarters in which they had remained unchanged.

The criteria for lending to households remained stable.

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According to the Central Bank’s Bank Lending Survey for the first quarter of 2024, the credit standards, as well as the terms and conditions for loans to enterprises, tightened in the first quarter of 2024, mainly due to Banks’ reduced risk tolerance, as well as their perception of increased risk about the general economic situation and the outlook for the economy.

On the other hand, the credit standards for loans to households remained unchanged in the first quarter of 2024, for mortgage loans, consumer and other loans.

The terms and conditions for housing loans also remained unchanged while they tightened for consumer credit and other lending to households.

The net demand for business loans decreased, in the first quarter of 2024, and at the same time, the net demand for housing loans as well as for consumer credit and other lending also decreased.

However, the survey notes that increased financing needs for fixed investment, possibly reflecting the positive growth prospects of the Cypriot economy, as well as debt refinancing/restructuring, contributed positively to loan demand.

As far as households are concerned, the net decline in demand for mortgage loans is attributed by banks to higher interest rates, lower consumer confidence and a weakening housing market outlook.

Finally, according to banks’ expectations for the second quarter of 2024, the lending criteria for both businesses and households are expected to remain unchanged compared to the previous quarter. At the same time, a decline in net demand for consumer and other loans from households is expected, while both net demand for business loans and mortgage loans from households are expected to remain stable.

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Industry Uproar Over Reduction in Electric Vehicle Subsidies

by News Editor

April 26, 2025

The recent move by the government to curtail subsidies for electric vehicles has stirred significant discontent among car importers in Cyprus. The Department of Road Transport (DRT) has slashed available grants under the Electric Vehicle Promotion Scheme as of April 23, leading to a rapid depletion of the subsidy pool and leaving many potential applicants disappointed.

Importers’ Concerns

According to the Cyprus Motor Vehicle Importers Association (CMVIA), the lack of transparency and failure to engage stakeholders prior to the decision have eroded trust in the government’s commitments. Importers now find themselves facing a precarious situation, with substantial stocks of electric vehicles and mounting promotional expenditures.

Public Interest and EU Compliance

Although the scheme aimed to support the transition to zero-emission transport until 2025, the DRT states that the curtailing of funds was necessary to comply with European funding terms, which warned against delays in vehicle deliveries. This decision has fueled market uncertainty despite the application portal experiencing dynamic changes.

Industry’s Ongoing Demand

The CMVIA refutes any claims suggesting waning interest in electric vehicles, underscoring the rapid exhaustion of available grants as proof of substantial demand. They highlight the importance of meeting Cyprus’s green transition targets, including putting 80,000 electric vehicles on roads by 2030.

While the total budget for subsidies saw an increase to €36.5 million in 2023, thanks to additional funding, ongoing difficulties in timely vehicle distribution have led to premature closures of applications. In response, CMVIA has called for urgent dialogue with the Minister of Transport to reassess the decision, fearing that it could endanger the future of e-mobility in Cyprus.