Net demand for loans rose in the second quarter of 2025, driven by both businesses and households, according to the Central Bank of Cyprus’ (CBC) bank lending survey.

In addition, the survey showed that banks expect further increases in net demand for both mortgage loans and consumer and other household loans in the third quarter of 2025.

Meanwhile, lending criteria for both businesses and households remained unchanged in the second quarter.

However, banks anticipate stricter lending criteria for businesses in the third quarter, with household lending standards expected to remain unchanged.

Specifically, the CBC survey for the second quarter of 2025 found that lending criteria for businesses and households, covering mortgage as well as consumer and other loans, remained unchanged compared with the previous quarter.

According to the survey, all factors affecting lending criteria across all categories had a neutral impact during the quarter under review.

“The overall terms and conditions for new loans or credit facilities to businesses and for new mortgage, consumer and other loans to households also remained unchanged during the second quarter of 2025 compared with the previous quarter,” the report stated.

For businesses, the overall terms remained stable. However, the survey recorded a decrease in interest rates on new business loans and in banks’ margins for standard new business loans, due to increased competition from other banking institutions and a perceived lower risk relative to general economic conditions and prospects.

For households, the CBC report showed that the overall terms and conditions for new mortgage loans during the second quarter of 2025 remained unchanged compared with the previous quarter.

However, as with business loans, interest rates on new mortgage loans and banks’ margins for standard new mortgage loans fell due to competitive pressures.

“All factors and individual conditions related to the overall terms and conditions for new consumer and other loans to households had a neutral effect during the quarter under review,” the report added.

Loan demand strengthens

The survey indicated that net demand for loans increased in the second quarter of 2025, for both businesses and households, for consumer and other loans and, to a greater extent, for mortgage loans.

“The net increase in business loan demand is attributed by banks to the financing needs of businesses both for inventories and working capital as well as for fixed investments,” the report noted.

For households, the net increase in demand for mortgage loans is attributed to the general level of interest rates, rising consumer confidence and improved housing market prospects.

Similarly, the increase in demand for consumer and other loans is attributed to the general level of interest rates, according to the survey.

Furthermore, according to banks’ expectations for the third quarter of 2025, lending criteria for businesses are expected to tighten, while standards for both categories of household loans are expected to remain unchanged.

At the same time, net demand for loans from businesses is expected to remain stable, while further increases are expected in net demand for both mortgage loans and consumer and other household loans.