**Cyprus Sees Spike in Housing Loans as Interest Rates Rise**
In May 2026, Cyprus experienced a notable increase in housing loans, coinciding with a rise in average interest rates. According to the latest data released by the Central Bank of Cyprus (CBC), the average interest rate on new housing purchase loans reached 4.06%, up from 3.73% in April. This increase is part of a broader trend observed in the lending landscape of the island.
The total net new loans issued in Cyprus surged to €361.90 million in May, a significant rise from €331.30 million in April. Among these, housing loans saw the most substantial growth, climbing to €145.50 million from €106.00 million the previous month. This robust increase indicates a strong demand for housing finance despite the rising costs associated with borrowing.
In addition to housing loans, new consumer loans also rose, reaching €23.90 million compared to €21.80 million in April. Loans extended to non-financial corporations of up to €1 million also saw a sharp increase, rising to €63.40 million from €39.40 million. However, the trend was not uniform across all sectors; new business loans exceeding €1 million declined to €121.50 million from €156.80 million in the previous month.
The CBC's analysis reveals that while the average interest rate for new housing loans has climbed, consumer loan rates have actually decreased, falling to 6.95% from 7.19%. Conversely, interest rates for corporate loans of up to €1 million saw a slight increase to 4.27%, up from 4.20%. For larger corporate loans exceeding €1 million, rates decreased to 3.85% from 4.08%.
The report also highlighted changes in deposit rates, with household time deposit interest rates rising to 1.25% from 1.20%. Rates for non-financial corporations also increased, moving to 1.31% from 1.23%. Despite these changes, the CBC noted that deposit rates in Cyprus remain among the lowest in the euro area, a situation attributed to the high liquidity present in the Cypriot banking system.
In terms of alignment with broader economic trends, the CBC indicated that loan interest rates in Cyprus are generally consistent with euro area medians. Specifically, interest rates on new housing loans in Cyprus are 0.2 percentage points below the euro area median, while rates for new corporate loans are 0.2 percentage points higher. The Central Bank also pointed out that the transmission of European Central Bank (ECB) monetary policy decisions is broadly in line with other euro area countries regarding existing loans. However, the pass-through effect to new corporate lending has been weaker during both periods of interest rate increases and reductions.
A noteworthy trend identified by the CBC is the shift in the structure of new housing loans. The share of loans with variable rates or fixed-rate periods of up to one year has significantly declined, dropping to 17.8% by May 2026, down from nearly 100% at the beginning of 2022. This shift indicates a growing preference among borrowers for loans with longer fixed-rate periods during the early years of repayment, likely as a strategy to mitigate the impact of rising interest rates.
As the Cypriot housing market continues to adapt to these changing financial conditions, the increase in housing loans reflects both a demand for property and a strategic response to the evolving interest rate environment. The Central Bank's insights into the lending landscape underscore the complexities of navigating financial decisions in a time of rising costs and changing borrower preferences.