The Central Bank of Cyprus (CBC) called on borrowers to be cautious and mindful of the rising interest rates imposed before selecting the terms of a loan contract.

“The rising trend in interest rates internationally in the past months has significantly increased the borrowing cost of both households and businesses,” the CBC said in a press release issued today.

So far, the ECB has raised its basic rates seven times since July 2022 sending lending rates to new highs following a long period of ultra-low rates, causing concerns over the borrowers’ repayment capacity.

The CBC, inter alia, called on borrowers before selecting an interest rate scheme, either flat of floating rate, to take into account that the level of interest rates is not static but is fluctuating and to carefully examine the loan contracts including the monthly instalment for the whole duration of a loan, as well as to carefully examine the interest rate cycle before selecting to “lock” their loan, particularly in case of loans with flat rate.

“Interest rates are fluctuating on the basis of the prevailing macroeconomic conditions of the time. For this reason, borrower decisions on the characteristics of a loan contract should be taken following research, analysis and concern,” the CBC said.