Overall lending from Cyprus banks during the first nine months of 2018 has dropped despite the significant decrease in interest rates and the economic growth the country has witnessed.
According to Central Bank of Cyprus data, a drop of 6.2% in overall borrowing was recorded year-on-year.
The drop is mainly a result of the 16.3% decline in institutional borrowing, as households have actually increased their borrowing.
According to the data, total loans extended by banks to households and businesses, apart from restructuring, dropped to EUR 2.268 bln in the first 9 months of 2018 from EUR 2.418 bln in the same period last year.
New loans to households increased by 15.6% to EUR 886 mln from EUR 767 mln in the first nine months of 2017.
The increase is attributed to housing loans, which amounted to EUR 631.6 mln from EUR 494.5 mln last year.
With mortgage rates at an all-time low, combined with attractive packages offered by banks, lending for house buying has doubled within a few years. The interest rate on mortgages dropped to 2.37% in the previous month.
On the other hand, new business loans recorded a drop of 16.3%, decreasing to EUR 1.382 bln from EUR 1.652 bln in the corresponding period of 2017.
This is the first decline recorded in business borrowing, overturning the upward trend of recent years. The decrease may be due to the last year’s relatively high base, as this year's business lending is well above the borrowing of 2016 and 2015.
Regarding household loan restructuring, figures for the first nine months fell to EUR 116.4 mln from EUR 147 mln while business loan restructuring dropped to EUR 137.6 mln from EUR 260.6 mln.
The reason behind the drop in figures regarding loan restructuring is that the pace has dropped sharply following the restructuring of the relatively easy and large portfolios.
The interest rate on consumer loans fell to 3.60% compared to 3.84% in the previous month.