Mortgage lending

The Central Bank of Cyprus (CBC) reported this week that its January 2023 Bank Loan Survey had recorded stricter lending criteria for all categories of loans, resulting in reduced supply and demand for loans.

The survey revealed that for all categories of loans, Cyprus continued to go through a period of tightening lending criteria.

In the fourth quarter of 2022, lending criteria for both businesses and all categories of loans to households tightened for the third consecutive quarter.

The central bank explained that Cypriot banks' perception of increased risk due to continued high uncertainty contributed to the tightening of their criteria for granting loans.

Moreover, banks' reduced tolerance for risk also contributed to the establishment of stricter criteria for granting business and housing loans in the same quarter.

Additionally, banks' assessment of increased risk in relation to business loans concerned the general economic situation and prospects, the solvency of the borrowers, and the requested collateral.

In the same quarter, the overall terms and conditions for granting loans to households for mortgages and, more so, for consumer and other loans, became stricter.

This development reflects the increased risk perception by the banks and the reduced risk tolerance, and in the specific case of housing loans, the reduced competition.

On the demand side, the net demand for loans in Cyprus from businesses and households in the fourth quarter of 2022 continued to register a decrease, mainly due to the reduced demand for financing fixed investments and the increase in lending rates.

The decrease in demand for consumer and other loans is attributed by the banks to the decrease in consumer confidence, the increase in interest rates, and the decrease in spending on the purchase of durable consumer goods.

According to the expectations of the banks, the period of reduced loan supply and demand is expected to continue in the first quarter of 2023.

What is more, banks expect stricter criteria for granting loans in Cyprus for all categories of loans to households and, to a greater extent, for business loans.

The net demand for loans in Cyprus is also expected to decrease further, both from businesses and from households, for all categories of loans.

According to the announcement, the results of the January 2023 Bank Lending Survey record the changes in lending criteria and loan demand that occurred in Cyprus in the fourth quarter of 2022 compared to the third quarter of the year.

The survey also shows the changes expected to occur in the first quarter of 2023 compared to the fourth quarter of 2022.

The results of the survey reflect the perceptions and expectations of the participants and do not reflect any perceptions, expectations, or estimates of the Central Bank of Cyprus.

The Bank Lending Survey is a qualitative survey of bank lending in the euro area aimed at increasing clarity on the banking landscape, including financing conditions in Cyprus.

The survey's questionnaire is addressed to a representative sample of banks in each euro area country and covers a wide range of topics on lending to businesses and households.

The survey is conducted four times a year, and the national results are published a few days after the publication of the research by the European Central Bank.

Source.... https://cyprus-mail.com/2023/04/15/stri … in-cyprus/

Interest rates for housing loans increased by 1.25 per cent in March 2023, compared to February 2023, according to the most recent data published by the Central Bank of Cyprus (CBC).

The rise in interest rates for housing loans comes at the same time as interest rates for corporate loans also increased.

Conversely, interest rates for household deposits decreased by 0.12 per cent, while interest rates for business deposits increased.

Looking at lending rates, the interest rate on consumer loans decreased to 5.05 per cent in March 2023, compared to 5.17 per cent in the previous month.

However, the interest rate on home loans rose sharply to 4.67 per cent, compared to 3.42 per cent in February 2023.

This increase in interest rates for home loans may have an impact on the real estate market, as higher borrowing costs could discourage potential home buyers from taking out mortgages.

Interest rates for loans to non-financial companies for amounts up to €1 million showed an increase to 5.60 per cent in March 2023, compared to 4.85 per cent in February 2023.

Meanwhile, the interest rate for loans to non-financial companies for amounts above €1 million registered an increase to 5.29 per cent in March 2023, compared to 4.54 per cent the previous month.

This rise in interest rates for corporate loans could make it more expensive for businesses to borrow money, which may slow down investment and expansion plans.

Turning to deposit rates, the interest rate for deposits with a term of up to one year from households decreased to 0.47 per cent in March 2023, compared to 0.59 per cent in February 2023.

However, the corresponding interest rate for deposits from non-financial companies showed an increase to 1.12 per cent in March 2023, compared to 0.69 per cent the previous month.

This could encourage more companies to deposit their funds in banks rather than invest in other areas.

Source.

https://cyprus-mail.com/2023/05/09/hous … arch-2023/

Demand for housing loans dropped by almost 40% in the first quarter of the year, as Cypriot households are put off by rising interest rates, according to the Central Bank of Cyprus.

Last Thursday, the European Central Bank pushed interest rates up by 0.25%, announcing its seventh increase since July 2022 in a bid to curb inflation.

The ECB has now brought the eurozone's key interest rate to 3.75%

According to the latest data released by the CBC, new loans to households showed a decrease of 37.3% in the first three months of 2023, dropping to €308 mln from €491 mln in the same quarter last year.

However, when compared to 2019 the data showed an increase of 4.4%.

As the CBC pointed out in its latest economic bulletin, the decline in new home loans observed, also recorded in the second and third quarters of 2022, may reflect the end of the government's interest rate subsidy for housing loans, as well as the gradual increase in interest rates by the ECB.

CBC's survey notes that, according to Cypriot banks, the drop in demand for housing loans is attributable to the upward trend in interest rates, the deterioration of consumer confidence and, to a lesser extent, the less favourable housing market outlook.

Business loans

Meanwhile, business loans issued in the first three months of the year have increased by 6.8% compared to the same period last year, reaching €448 mln, up from 420 mln.

Compared to the same period in pre-COVID 2019, there is a decrease of 19.2%.

The total amount of loans channeled by banks to households and businesses, excluding restructurings, dropped to €756 mln in the first quarter of 2023, from €911 mln in 2022, and €849 mln in 2019.

According to the CBC, since July 2022, the dynamics in lending have slowed down, reflecting the increased uncertainty in the geopolitical and economic environment, the even more stringent lending criteria of banks, higher interest rates and the negative impact of inflation on real disposable income of households and in the profit margin of businesses.

“At the same time, the increased uncertainty due to successive crises and the upward trend of interest rates seem to be limiting new corporate borrowing for large investment projects,” noted the CBC.

According to Central Bank data, new loans granted by banks in 2022 amounted to €3.2 bln from €2.9 bln in 2021, marking an increase of 10%.

Compared to 2019, total loans show an increase of 8.4%.

https://www.financialmirror.com/2023/05 … y-a-third/