Housing loans reach new peak

Despite strong inflationary pressures crushing household incomes, the value of new mortgages taken out had reached its highest level since December 2014, when the Central Bank began recording data.

Net new mortgage loans spiked 33% to €693.6 mln in the first half of 2022, from €520.2 mln in H1 2021, €306.3 mln in the same period of 2020 and €454.3 mln in 2019.

Increased demand for housing loans is partly attributed to the low-interest rates observed in the market in the first six months.

According to the latest data from the Central Bank, mortgage interest rates over five years stood at 2.07% in June 2022, up from 2.05% in June 2021 and 2.38% in June 2019.

In 2014, mortgage interest rates were 4.58%, while in 2008, they were higher at 5.38%.

“Despite the inflationary trends observed in recent months, however, housing demand remains at satisfactory levels,” a Bank of Cyprus official told news site Stockwatch.

“The year started very well, continuing to pick up the pace from last year.

“We had a slowdown in March-April due to the uncertainty created by the war in Ukraine, but after May, we saw a recovery in housing loans.

“We are now looking at the consequences of inflation, eager to see how the year will play out”, pointed out an official from the second-largest lender Hellenic Bank.

Cyprus banks offer financing up to 80% of the value of the loan for a first home with the possibility of repayment up to 35 years.

They also allow borrowers to suspend the payment of instalments up to twice a year.

Financing up to 80% is offered for first home renovations and 70% for holiday home renovations and plot purchases.

For a second home, financing covers up to 70% of the property’s value and should be paid off within 25 years.

According to the Central Bank, housing loans to Cypriot residents in June amounted to €8.6 bln, up from €8.4 bln in May and €8.2 bln in June 2021. In June 2019, housing loans were €8.5 bln.