Banks in Cyprus are preparing to ease lending criteria for new mortgages, business and consumer loans while anticipating increased demand for credit, according to a Central Bank survey.
The January 2025 Bank Lending Survey shows a more relaxed approach to borrower assessment compared to previous quarters when conditions were more restrictive, the central bank said.
If the easing continues, it would mark the first relaxation of business lending criteria since the 2009 financial crisis and the first for household loans since 2017, following years of tightening or unchanged lending standards.
During the fourth quarter of 2024, the overall terms and conditions for new business loans became more relaxed compared to the previous quarter, the central bank stated in its report.
The survey recorded interest rate reductions and lower bank margins across all loan categories, including both standard loans and higher-risk lending.
This easing of terms reflects banks’ perception of decreased risk in the economy, with competitive pressures between banking institutions also influencing lending decisions for business and mortgage loans.
For mortgage loans specifically, this marks the first reduction in this factor since 2015, while consumer loan terms have relaxed for the first time since the first quarter of 2018.
The proportion of rejected business loan applications decreased in the fourth quarter for the first time since the second quarter of 2019, with both small-to-medium enterprises and large corporations benefiting from the more lenient approach.
In contrast, the rejection rate for household loan applications increased across all loan categories during the same period, despite the overall easing of lending terms.
Read more:
