According to the Central Bank's bank lending survey, it seems that borrowers are returning to the bank counters. Specifically, the recovery in the net demand for loans from companies in Cyprus recorded in the first quarter (for the first time since the first quarter of 2011) continued in the second quarter of 2015, at the same levels as in the previous quarter.
At the same time, net demand for loans from households increased for the first time since the second quarter of 2010, while net demand for loans for consumer and other purposes increased for the first time since the beginning of this survey (2008). . According to the banks' expectations for the third quarter of 2015, the net demand from all loan categories is expected to remain unchanged in Cyprus and to increase further in the euro area. It is worth noting that the last time that the net demand for mortgages increased was in the second quarter of 2010.
The general level of interest rates was the main factor that contributed to the increase in net demand. Other factors that have positively affected the net demand for mortgages include debt restructuring and renegotiation, internal savings financing and loans from other banking institutions. Business lending conditions, despite the high levels of leverage in the sector, have begun to loosen.
Based on the research findings, the terms regarding the loan margin for ordinary loans and interest-free charges became looser, while the terms related to the size, duration of the loan and the security requirements became stricter. The remaining terms remained unchanged. The factors that contributed to the relaxation of the terms were the reduction in the cost of capital and the restrictions associated with the balance sheet as well as the exertion of competition pressures. It is noted that the reduction in the loan margin largely reflects the effect of the revised Central interest rate directive on market deposit rates.
In consumer loans the picture is different. The conditions set by credit institutions regarding the security requirements, the size of the loan and the duration have become stricter. A noteworthy fact is the increase in net demand for consumer and other loans from households for the first time since the beginning of this survey in 2008. The factors that contributed to the increase in net demand for consumer and other loans were the general interest rate level, real estate mortgage and internal financing.
Source: Liberal