Euro area bank interest rates moved further apart from Cypriot ones in June 2026. According to the European Central Bank statistics released on 31 July, the composite cost of new corporate loans rose 15 basis points to 3.79 percent, while the rate on new loans for house purchase held steady at 3.51 percent.
Deposits moved, but not everywhere
On the deposit side the euro area composite rate for new corporate time deposits gained 17 basis points to 2.21 percent, and the household equivalent rose 13 basis points to 2.09 percent. Cyprus moved in the same direction and stayed well behind. Figures attributed to the Central Bank of Cyprus put household deposits up to 1.42 percent from 1.25 percent, and corporate deposits at 1.41 percent from 1.31 percent.
That leaves a gap of 67 basis points for households and 80 basis points for companies against the euro area composite. On the lending side the picture is closer to the average: mortgages in Cyprus stood at 4.04 percent and consumer credit at 6.50 percent.
The number that explains it
The central bank attributes the weak transmission to the structure of the domestic banking system, naming exceptionally high liquidity and the small size of the sector. The supporting figure is a liquidity coverage ratio of 310 percent in June, against an EU median of 189 percent and an EU average of 158 percent.
The regulatory minimum for that ratio is 100 percent. Cypriot banks therefore hold roughly three times the required liquid assets and about 1.6 times the EU median. A bank in that position has little reason to compete for deposits by raising what it pays, which is the mechanism behind the gap rather than an explanation offered after the fact.
Not a local anomaly alone
Weak deposit pass-through is a documented euro area feature, not only a Cypriot one. An ECB working paper published in July 2026, Bank deposit pricing in the euro area, puts the long-run pass-through for household overnight deposits at 0.247 and finds it falling across cycles, to roughly 0.1 in the 2022 to 2024 period. The paper describes the pass-through as low, asymmetric and decreasing over time.
What changed against last year
The direction has reversed. In June 2025 the Cypriot household deposit rate stood at 1.13 percent and was falling. A year later it is rising, at 1.42 percent, while the gap to the euro area has stayed roughly constant. Savers are receiving more in absolute terms and are no closer to the euro area average than they were.
One structural change sits underneath. Only 10.9 percent of new housing loans in Cyprus carried a variable rate in June, against almost all of them at the start of 2022. Fewer borrowers now feel policy moves directly, which further loosens the link between the policy rate and what households actually experience.
