ECB Interest Rate Hike Looms: What It Means for Cyprus Mortgage Holders

Cyprus homeowners may face another increase in their monthly mortgage payments as the European Central Bank is widely expected to raise interest rates on Thursday. The ECB's deposit rate could rise from 2.25% to 2.5%, which would make borrowing more expensive for those with variable-rate loans linked to Euribor or other benchmarks.

For example, a borrower with €150,000 left on their mortgage and 20 years remaining would see their monthly payment increase from approximately €898 to €918 if the interest rate rose from 3.86% to 4.11%. This represents an extra €20 per month or €240 per year.

Those with fixed-rate mortgages may not feel the immediate impact, but could face higher costs when their fixed period expires. New home loan applicants may also find that the amount they can borrow becomes smaller as banks assess whether they can afford the higher repayments.

The Central Bank of Cyprus reported an average interest rate of 3.86% on new housing loans in May, although rates vary depending on the bank, property, and borrower. Economists believe Thursday's increase could be the last for now, but much depends on the Middle East conflict and energy prices remaining high.