Central Bank of Cyprus reports shift to fixed-rate bank lending

On July 31, 2026, the Central Bank of Cyprus (CBC) released an economic brief highlighting a significant transformation in the domestic lending landscape. The report attributes this shift to the European Central Bank’s (ECB) monetary policy cycle, which included a period of tightening between July 2022 and September 2023, followed by an easing phase from June 2024 to June 2025.

Borrowers are increasingly opting for loans with fixed interest rates for periods exceeding one year, a trend most prominent in the mortgage market. Prior to 2022, the majority of new lending in Cyprus utilized floating rates or short-term fixes. This move toward long-term fixed-rate products has reduced borrower exposure to interest rate volatility, narrowed the spread between lending and deposit rates, and aligned Cyprus's financing conditions more closely with the broader eurozone standards. Financial institutions have responded to this consumer preference for stability by offering more competitive long-term loan options.

The CBC analysis confirms that this restructuring of bank lending has fundamentally altered how monetary policy is transmitted through the local economy. The shift is expected to provide greater financial predictability for households and businesses moving forward.