Rising interest rates that gave rise to increased borrowing costs have weighed heavily on mortgage demand in Cyprus, according to Delfi Partners’ analysis, which looked at data for the first three quarters of the last four years.
Demand for housing loans has been affected by the European Central Bank’ (ECB) interest rate increases aimed at bringing inflation under control.
The report says that fluctuations in Euribor—a critical benchmark for Cyprus’s mortgage rates—have increasingly impacted the volume of mortgaged properties as rates reached higher levels over the past four years.
In 2021, when Euribor stood at -0.521 per cent, Cyprus recorded 11,289 mortgages in the first nine months, supported by favorable borrowing conditions. By September 2022, Euribor had climbed to 1.24 per cent, and mortgage numbers fell slightly to 11,218, marking an early impact of higher rates on borrowing patterns.
As Euribor approached 4 per cent in 2023, mortgage demand fell considerably, with numbers dropping to 8,302 in the nine-month period.
Higher borrowing costs reduced loan access for prospective buyers, reducing demand in the real estate sector. Although Euribor moved downward in 2024, the decrease in mortgage numbers continued, with totals at 8,251.
September data reveals similar shifts. In 2021, Euribor’s negative rate corresponded with 1,397 mortgages recorded for the month. As the rate climbed to 1.24 per cent in September 2022, mortgages dropped to 1,271. In September 2023, with Euribor close to 4 per cent mortgages fell sharply to 989, reflecting peak rate-related pressures. A modest recovery followed in September 2024, with Euribor at 3.351 per cent and mortgage numbers rebounding to 1,039.
Commenting on these patterns, Michalis Loizou, an executive at Delfi Partners, stated, “The cycle of rising interest rates has come full circle as the ECB has already made two cuts and new ones are expected.”
He noted, “Euribor, to which a large proportion of mortgages in Cyprus are linked, has been steadily declining and has reached 3.092 per cent in the first week of October, recording a 1.046 per cent decrease compared to a high of 4.138 per cent in October 2023.”
Loizou said that this decline in Euribor has begun to stabilise mortgage demand, holding 2024 figures close to last year’s levels.
He added, “Given that forecasts have Euribor continuing to decline in 2025 to around 2.63 per cent and further to 1.88 per cent in 2026, we expect demand for mortgages to recover as well. Hopefully, the real estate market in Cyprus will remain positive and will continue to contribute substantially to economic growth.”
