Net demand for loans in Cyprus, both by businesses and by households, continued to increase in the fourth quarter of 2018, according to the Banking Survey for January 2019, which was published on Wednesday by the Central Bank of Cyprus.
According to the survey, the increased demand reflects mainly the continued growth in economic activity and it is supported by historically low domestic lending rates.
According to the expectations of the banks in Cyprus and the euro area for the first quarter of 2019, net demand for loans is expected to increase further for all loan categories.
It is noted that the expectations for a further increase in the net demand for new loans by the domestic non-financial private sector (households and enterprises) suggest a positive indication for the continuation of the strong economic growth of the Cypriot economy for the next quarter as well.
Net demand for business loans in Cyprus continues to register a broader increase since the first quarter of 2015, in line with the continued favourable economic environment and the positive investment climate. The increase recorded in the fourth quarter of 2018 was higher than expected based on the banks` responses in the previous quarter.
In relation to housing loans, the increase recorded in the fourth quarter of 2018 was lower than expected by the banks in the previous quarter, but also lower than the increase recorded in the previous quarter. It is noted that the demand for mortgage loans tends to slow down from the third quarter of 2018.
Net demand for consumer and other loans by households in Cyprus recorded an increase in the fourth quarter of 2018, to a lesser extent than expected by banks in the previous quarter. It is noted that the demand for housing loans shows a slowdown in the first quarter of 2018.
At the same time, in the fourth quarter of 2018, the lending criteria for businesses and households in Cyprus continued to remain unchanged from the previous quarter. The survey notes, however, that there has been a small reduction in the margin of banks for housing loans, mainly due to competition pressure.
Lending criteria have been tightened since the first quarter of 2011 up to the fourth quarter of 2014, and remain unchanged since the first quarter of 2015.
In line with the expectations of banks for the first quarter of 2019, the criteria for granting loans to Cyprus in all categories are expected to remain unchanged.