Banks in Cyprus have higher interest rates for loans and offer lower rates for deposits than most eurozone countries, data by the European Central Bank (ECB) show.

Specifically, ECB data from April reveals a decrease in the average interest rate for time deposits for up to one year for households, dropping to 0.41% compared to the previous month’s 0.47%.

In the Eurozone, the average deposit interest rate for households stands at 2.27%, highlighting once again that Cypriot depositors are among the most disadvantaged in the EU. Italy (3.11%), France (3.03%), and Belgium (2.65%) occupy the top positions in the ECB ranking. Greece has a weighted average interest rate of 1.22%. The corresponding rate for deposits from non-financial corporations decreased to 0.73%.

The average interest rate for business deposits in the Eurozone is 2.79%, with a 2.06% difference compared to Cyprus. The ECB data clearly shows that Cypriot depositors are not adequately rewarded for their deposited funds, while borrowers pay higher interest rates within the Eurozone.

High lending rates

According to the ECB data, Cyprus is among the countries which have the highest lending rates in the Eurozone.

Furthermore, the average interest rate for housing loans is 4.45% in Cyprus and 4.03% in the Eurozone, resulting in a spread of 3.62% between housing loan and deposit rates, one of the highest in the Eurozone.

Greece has a housing loan rate of 4.06%, Spain 3.47%, France 2.99%, Luxembourg 4.11%, Malta 2.56%, Austria 4.06%, Slovakia 3.71%, and Finland 3.62%. Cypriot entrepreneurs borrow at higher interest rates compared to entrepreneurs in other Eurozone countries, resulting in a rate of 5.31% for Cyprus, while the Eurozone average is 4.74%.

Diverging trends in lending and deposit rates

The Cyprus Central Bank’s annual report for 2022, published last week, highlights the significant increase in lending rates compared to deposit rates. “Amid the normalisation of the ECB’s monetary policy, lending rates in Cyprus followed an upward trend in 2022, with a greater pace in the second half of the year. The lending rates for households and businesses reached 3.34% and 4.71% respectively by the end of 2022, compared to 2.21% and 3.25% at the end of 2021. Domestic deposit rates experienced a smaller increase of 29 and 59 basis points respectively from the beginning of the year, closing at 0.35% for households and 0.61% for businesses by the end of 2022.”

Supporting households with liquidity

According to data from the European Banking Authority (EBA) presented by DBRS, Greece and Cyprus rank among the top countries in terms of the proportion of household deposits in their funding mix. For instance, Denmark ranks last in the ranking with approximately 10% of household funding coming from deposits, as the majority (70%) of its funding comes from debt securities. Moreover, the agency notes that European depositors are transferring their balances at an increasing pace to alternative products.