Repeated ECB interest rate hikes significantly slow mortgage lending
Net new lending (excluding restructurings) in Cyprus reached €1.73 billion in the first half of 2023, showing a small annual increase of 1.26%, with repeated interest rate hikes by the ECB significantly slowing mortgage lending loans.
However, based on data from the Central Bank of Cyprus (CBC), new loans in June showed a significant decrease, falling to €240 million from €536 million in May. The large monthly amount of new loans last month was due to a very high granting of new business loans above €1 million which reached €351 million.
The figures for June
The lion's share of new lending for June was recorded by mortgages, which amounted to €84.4m compared to €104 .7 in the previous month.
Business loans, which traditionally account for the largest share of new lending, narrowed to €61.2m in June, from €351m the previous month. This is possibly related to delays in processing loan applications to banks due to the Easter holidays in April, resulting in new lending being carried over to May, increasing the May total.
Business loans up to €1 million. in June they stood at €42.6 million compared to €48.6 million the previous month, while other new loans showed a significant increase to €30.1 million from €9.6 the previous month.
Finally, new consumer loans remained at roughly the same levels after reaching €21.5 million in June from €22.7 million the previous month.
Severe slowdown in housing
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Based on CBC data, it appears that the consecutive interest rate increases by the ECB, combined with the increase in construction costs, negatively affected the granting of housing loans in the first half of this year, which this year amounted to 491 million showing a decrease of 29.1% on an annual basis.
The opposite course was shown by corporate loans over €1 million, which amounted to €817.8 million compared to €626.1 million in the corresponding period last year, showing a percentage increase of 30.6%.
An annual decrease of 6.8% was presented by net new corporate loans up to €1 million, which fell to €256 million in the first half of 2023 compared to €274.6 million in the corresponding period last year.
The granting of new consumer loans showed an annual increase of 39%, which amounted to €108 million compared to €77.8 million in the corresponding period last year, while other net new loans in the January-June period showed an increase of 51 .3% and amounted to €61.3 million compared to €40.5 million in the corresponding period last year.
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