Banks slashed mortgage rates in September in a push to make home ownership attractive to wider age groups and income brackets, particularly young couples.
Data released yesterday by the Central Bank of Cyprus and the European Central Bank shows house hunters now have favourable conditions, with the average mortgage rate dropping to its lowest point this year.
The interest rate for housing loans fell to 3.63%, compared with 3.91% the previous month. Banking sources said the aim is to stimulate the housing loan market amid rising property prices, making mortgage repayments affordable for average households through lower rates.
Steepest drop since last year
The figures show this is the lowest average mortgage rate since the start of the year, down 0.8 percentage points from January. The decline in borrowing costs is particularly significant compared with last year, when the average rate for home purchases stood at 4.53%.
Looking further back, the average rate was 4.33% in September 2023 and lower still at 3.06% in September 2022.
The Central Bank noted that credit institutions’ housing loan portfolios comprise various types of mortgages—such as loans for primary residences and holiday homes—which carry different risk profiles and interest rates. The composition of these portfolios changes monthly, meaning the weighted average rate is affected by this variation regardless of whether banks raise or cut their rates.
Net new loans for home purchases rose in September to €112.9 million out of total new lending of €165.4 million, compared with €96.3 million the previous month from total new lending of €144.1 million, according to the data.
Business lending costs mixed
Business borrowing costs have fallen substantially compared with 2024 and 2023, though monthly changes show increases. The interest rate for loans to non-financial companies up to €1 million rose to 4.32%, compared with 4.19% the previous month.
However, business borrowing costs for new transactions have dropped since the start of the year when they stood at 5%, with an even larger gap compared with last year. The average rate in this category was 5.52% in September 2024 and reached 5.79% in September 2023.
The rate for loans to non-financial companies above €1 million recorded a decrease to 3.79%, compared with 4.30% the previous month. In September 2024 the average rate was 5.26%, falling from 5.59% in 2023.
Net new loans to non-financial companies up to €1 million increased to €62.7 million from total new lending of €83.7 million, compared with €38.1 million the previous month from total new lending of €52.6 million.
Net new loans to non-financial companies above €1 million recorded an increase to €246.7 million from total new lending of €492.5 million, compared with €83.9 million the previous month from total new lending of €190.6 million.
Deposit rates trail eurozone
In contrast with loan rates, deposit rates remain significantly lower than the eurozone median. The rate on existing time deposits from households stood at 0.78% in September 2025, compared with 1.74% for eurozone countries. The rate on existing time deposits from non-financial companies reached 1.08%, compared with 1.94% for eurozone countries.
Read more:
Banks tighten lending criteria as businesses face higher borrowing costs
