Despite measures taken by the Central Bank of Cyprus earlier in the year, loan growth hit a 10-year high in December 2007.
According to the Central Bank’s figures, loans made by the commercial banks rocketed 36.4% in December following a 34.2% rise in November and a 33.3% rise in October. By December 2007, the banks loan portfolios had increased to €27.32 billion.
The construction sector contributed heavily to the increase in loan portfolios. In December, these grew by 40.8% to €5.29 billion.
The Central Bank expressed its concern on the fast growth of loans that boost consumption and inflation. To moderate it, it cut the lending ceiling for the second property from 70% to 60%.
However in December 2007, the Central Bank unexpectedly cut the domestic rates for existing loans to 4%, bringing the cost of borrowing down prior to Cyprus’ adoption of the Euro on 1st January 2008.
