The Central Bank of Cyprus reports steady lending standards alongside an uptick in credit demand for investments and housing, though banks signal tighter criteria ahead for Q2.

Credit Standards and Future Forecasts

Lending criteria for loans to businesses and households remained unchanged in the first quarter of 2026 compared with the previous quarter, while net demand for loans increased across all categories, according to the Central Bank of Cyprus’ Bank Lending Survey.

The survey, published on Tuesday, showed that credit standards for business loans, housing loans and consumer and other lending to households were unchanged in the first quarter.

However, banks expect lending criteria to tighten in the second quarter of 2026 for both businesses and households, across all loan categories. At the same time, net demand for loans is expected to remain stable.

Terms for New Business Loans Tighten

According to the Central Bank, the overall terms and conditions for new loans or credit lines to businesses became tighter in the first quarter, due to lower risk tolerance by banks.

In particular, banks reported an increase in margins on riskier loans.

For households, overall terms and conditions for housing loans, as well as consumer and other loans, remained unchanged during the period under review. The Central Bank said this appeared to be linked to the continued strength of economic activity.

Rising Demand Across All Loan Categories

Net demand for loans rose in the first quarter of 2026 from both businesses and households, across all loan categories.

The increase in demand for business loans was driven by financing needs for fixed investment.

For households, higher demand for housing loans was attributed to improved consumer confidence, while increased demand for consumer and other loans was linked both to higher spending on durable consumer goods and improved consumer sentiment.

The Central Bank said the rise in loan demand, particularly from businesses for fixed investment and from households for consumption and housing, may be linked to the continued resilience and adaptability of the Cypriot economy amid ongoing external uncertainty, as well as to the strength of the labour market.

Regarding housing loans, the survey also noted continued credit expansion in the first quarter of 2026, in line with resilience in the housing market and the positive trend in households’ intentions to invest in housing.

Source: CNA(ΚΥΠΕ)