The Central Bank of Cyprus (CBC) has declared a new reference interest rate at 11.76 percent, impacting financial transactions like loans. Exceeding this rate is now a criminal offense according to Article 314A of the Penal Code Law, Cap. 154, in a move to safeguard consumers and promote fairness in financial dealings.
Cyprus is gearing up for the tourist season by streamlining work permit processes for foreigners, with Labor Minister Yiannis Panayiotou noting a significant decrease in wait times. Over 4,000 new permits were issued by May’s end, ensuring the tourism sector is fully staffed for the summer influx.
The Cyprus Borrowers Association hails the government’s extension of support measures to ease economic strain on households and businesses, focusing on cutting lending rates and reducing nonperforming loans. Finance Minister Makis Keravnos anticipates progress by bridging the gap between deposit and loan rates, aiming to boost economic activity and alleviate financial burdens on Cypriots.
The loan demand in Cyprus has dropped significantly due to high interest rates, with potential borrowers hesitant to take on new debt amidst economic uncertainties. While lending criteria for households remain unchanged, the spike in interest rates has deterred individuals from seeking loans, especially for real estate and consumables, signaling cautious consumer sentiment.
Eurobank Cyprus has launched a program to reduce interest rates on home loans by 50 basis points for 1,400 borrowers with uptodate repayments, effective from June 1, 2023. This initiative aims to offer financial relief amidst economic fluctuations, with eligible recipients automatically included without the need for applications.
The impact of bank lending practices on economic growth is profound, with adjustments in interest rates directly influencing borrowing affordability, business sentiment, and development. Despite the recent rate cut by the European Central Bank, local banks’ reluctance to lend to businesses, preference for depositing funds with the ECB, and lack of competition among banks pose challenges to economic dynamism and growth in Cyprus.
In Cyprus, consumer loan rates have slightly increased to 6.19%, while housing loan rates have decreased to 4.75%. This development reflects consumer confidence and investment decisions across the Cypriot economy, presenting a unique economic trend in the country’s financial landscape.
The corporate loan market in Cyprus is expected to see a resurgence with the forecasted interest rate cut, potentially boosting loan applications despite existing challenges. Bankers are prepared to adapt and provide support to businesses amidst geopolitical tensions and economic uncertainties, positioning themselves to navigate through the evolving market dynamics.
Addressing the interest rate disparity in Cyprus is crucial for economic stability and growth, as highlighted by the Central Bank’s governor, Christodoulos Patsalides. With a focus on bridging the gap between lending and deposit rates, Cyprus aims to strengthen its financial resilience and foster a more balanced economic environment.
In February 2024, Cyprus experienced a surge in new loans totaling €575.5 million, driven by increased lending to companies, signaling economic growth and confidence in the financial sector. The rise in loans, particularly in the corporate sector with significant loans exceeding €1 million, highlights a shift towards largerscale investments and expansion within the Cypriot economy.
