Cyprus borrowers have abandoned variable interest rates in a three-year reversal, with fixed-rate business loans surging from 1% to 35% of the market and fixed-rate housing loans now accounting for 64%, Central Bank data shows.
Banks promoted the schemes after the ECB raised rates to combat inflation, whilst borrowers sought protection from rate volatility, according to the Central Bank’s Economic Bulletin. Customers now lock in instalments for three, five or 10 years, insulated from ECB rate changes.
Business loans
Fixed-rate business loans with terms over one year jumped from just 1% in 2022 to 35% in January-October 2025. Variable rate loans with terms up to one year fell from 99% to 65% over the same period.
The shift reflects increased business demand for stability in financing costs, the Central Bank said.
Average rates for new business loans fell from 5.4% in June 2024 to 3.6% in October 2025—a drop of 184 basis points that exceeded the 162 basis point reduction across the eurozone.
Cyprus achieved a 92% transmission rate of the ECB’s Deposit Facility Rate cuts, outpacing the 81% eurozone median. The rapid adjustment stems from Cyprus’s reliance on short-term loans linked to Euribor, which track ECB rate changes closely.
The rate decline brought Cyprus into near-complete alignment with eurozone levels. By October 2025, new business loan rates reached 3.6%, matching the eurozone median of 3.5%. The gap, which peaked at 1.7 percentage points, shrank to 0.1%.
Housing loans
The reversal accelerated even faster in housing. Variable rate housing loans with terms up to one year plunged from 95% in 2022 to 21% in January-October 2025.
Medium-term fixed-rate housing loans—with terms between one and five years—became the dominant product, capturing 64% of new lending in January-October 2025. The products offered more attractive rates, Central Bank data shows.
The shift reflects growing household demand for predictability in financial obligations and protection from interest rate risk, the Central Bank said.
From May 2025 onwards, Cyprus housing loan rates converged with eurozone levels, falling to 3.1% in October 2025 versus a eurozone median of 3.4%.
Slower policy transmission ahead
The surge in fixed-rate lending means future ECB rate changes will take longer to filter through to borrowers. A larger share of the loan portfolio is now insulated from immediate rate movements.
During the ECB’s easing cycle from June 2024 to June 2025, new lending rates fell sharply, converging towards eurozone medians, the Central Bank’s Economic Bulletin shows based on October 2025 data.
Deposit rates adjusted more slowly. Rates were already low when easing began, reflecting high excess liquidity in the domestic banking system.
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