Interest rate on consumer loans climbs as deposit rates ease

Deposit interest rates in Cyprus declined in March 2025 for both households and businesses, reflecting a softening trend in returns on short-term savings, according to the Central Bank of Cyprus (CBC).

At the same time, new lending surged across all major categories, with total new loans more than doubling to €964.2 million compared to the previous month.

The data, published on Tuesday in the April 2025 edition of Monetary and Financial Statistics, outline the average interest rates applied by Cyprus banks on deposits and loans of euro area residents in euro, as well as the volumes of new euro-denominated loans.

The interest rate on household deposits with an agreed maturity of up to one year recorded a decline to 1.41 per cent, compared with 1.51 per cent in the previous month.

Similarly, the interest rate on deposits from non-financial corporations dropped to 1.31 per cent, from 1.54 per cent in February.

Lending rates showed a mixed trend. The interest rate on consumer credit rose to 7.4 per cent, up from 7.11 per cent a month earlier.

Meanwhile, the interest rate on loans for the purchasing of a house remained unchanged at 4.56 per cent.

The Central Bank highlighted that this category includes a variety of loan types—such as those for primary residences and holiday homes—which carry different risk levels and interest rates.

As a result, changes in the composition of housing loans can affect the average interest rate, independently of any actual rate adjustments by MFIs.

The interest rate on loans to non-financial corporations for amounts up to €1 million increased to 4.96 per cent, from 4.66 per cent in February.

In contrast, loans to non-financial corporations for amounts over €1 million saw their interest rate fall to 3.87 per cent, from 4.48 per cent in the previous month.

Moreover, new lending volumes rose significantly in March.

Total new loans jumped to €964.2 million, compared with €431.8 million in February.

New loans for consumption increased to €24.5 million, of which €22.8 million were categorised as pure new loans, up from €21.2 million the previous month (€19.3 million pure new loans).

New house purchase loans rose to €188.2 million, of which €103.8 million were pure new loans, compared with €152.1 million in February (€92.8 million pure new loans).

Loans to non-financial corporations for amounts up to €1 million increased to €82.4 million, with €48.5 million recorded as pure new loans, up from €55.8 million (€42.0 million pure new loans) the previous month.

The largest increase was seen in new loans to non-financial corporations for amounts exceeding €1 million, which surged to €661.9 million, of which €483.1 million were pure new loans, compared with €188.1 million (€92.0 million pure new loans) in February.

In a separate publication also released on Tuesday, the Central Bank of Cyprus provided updated data on non-performing loans for the banking sector as of February 28, 2025.

The ratio of NPLs fell marginally to 6.2 per cent from 6.3 per cent at the end of January.

According to the Central Bank, this improvement was driven by repayments, positive credit migrations into performing categories, write-offs, and currency fluctuations.

The coverage ratio of NPLs with provisions also improved, reaching 58.9 per cent in February, compared with 58.3 per cent the month before.

Restructured loans of authorised credit institutions totalled €1.3 billion at the end of February.

Of these, loans amounting to €0.7 billion continue to be classified as non-performing.