Cyprus businesses benefit from lower rates amid bank competition, CBC reports

The Central Bank of Cyprus (CBC) announced on Thursday that credit conditions for businesses and households remained stable in the fourth quarter of 2025 despite a significant rise in demand for residential and consumer loans.

The January 2026 Bank Lending Survey found that lending criteria for all categories remained unchanged during the final three months of last year.

Criteria for loans to enterprises have now remained at their strictest levels since the second quarter of 2024.

For households, the credit standards have stayed at the tightest levels reached in the fourth quarter of 2023.

The Central Bank of Cyprus stated that all underlying factors related to credit standards across all categories had a neutral impact during the quarter under review.

“The results reflect the perceptions and expectations of the participating banks and do not reflect any perceptions, expectations or estimates of the Central Bank of Cyprus,” the report explained.

Overall, credit conditions and terms for new loans or credit lines to businesses and households remained unchanged during the fourth quarter of 2025 when compared to the previous three months.

For enterprises, these terms remained stable as a whole even though the survey recorded a continued decrease in interest rates for new business loans and bank margins for standard lending.

This easing of specific terms for businesses was driven by competitive pressures from other banking institutions and a perception of reduced risk regarding the general economic situation and outlook.

Regarding households, both the individual terms and the factors shaping the overall conditions for new housing and consumer loans had a neutral effect during the reported period.

“The lending criteria for loans or credit lines to enterprises in Cyprus remained unchanged during the fourth quarter of 2025 for six consecutive quarters,” the central bank confirmed.

The survey indicated that these criteria remained steady for both small and medium-sized enterprises and large-scale corporations.

While the supply side remained firm, household demand for credit saw a notable increase for both housing and, more significantly, consumer and other loans.

“The net increase in demand for housing loans is attributed to the general level of interest rates, the increase in consumer confidence and the improved prospects of the housing market,” the survey noted.

Similarly, the rise in demand for residential and consumer loans from households was attributed to increased spending on durable consumer goods.

Net demand for loans from enterprises remained unchanged during the fourth quarter of 2025 compared to the preceding quarter.

Banks participating in the study expect that lending criteria for businesses and households will remain unchanged in the first quarter of 2026.

Moreover, the CBC reported that net demand for all categories of loans is also expected to remain stable during the first quarter of 2026.

The current survey was conducted between December 15, 2025, and January 13, 2026, and covers approximately 85 per cent of the lending market in Cyprus.

The analysis of the results employs a diffusion index to track changes in banking sentiment and market dynamics.

The central bank explained that a positive index value indicates a tightening of criteria or an increase in demand, while a negative value suggests a loosening of rules or a decline in interest.

Factors such as bank risk tolerance, capital costs, and balance sheet constraints were all cited as having a neutral impact on the market at the end of 2025.