Two largest banks on the island, Bank of Cyprus and Laiki Bank, sharing over 50 % of the market, had in all essence frozen all lending even to the very best of clients. Lending became a rare exception – only in limited cases or when vendors agreed to fund the mortgage itself by leaving the proceeds of a sale in a long term account with the bank. The only other way to get a loan from the banks was to buy an indebted developers property and allow the bank to do some “write offs” on the bottom line.

This can hardly be classed as a functional banking system by anybody’s standards. But this has been a reality since the beginning of 2012 (our last mortgage was secured in December 2011).  Acute lack of liquidity, forcing banks to act not really like banks, has had a sustained and downward pressure on property prices. Although the vast majority of our buyers have always been “cash buyers” now a cash buyer became in all essence the only buyer.

It’s been a whole year after the Cypriot rescue and the Bank of Cyprus still remains a non-Bank in the mortgage market. Although their reckless lending in the past had caused them to pull back, they have simply gone too far. Potential buyers who would bring profit to the bank are forced to delay a purchase or simply buy what they can with available cash.  

As a successful example to battle the negative trends on the market we may look at the UK government. They have done much to stimulate the housing market with varicose help to buy schemes. Low interest rates and even lower deposits have brought great results. It’s clear that prudent lending by BoC to qualified clients must return not only for the long term health of the property market but for the bank itself. No bank can exist without lending, this is after all how they make money. As the main player Bank Of Cyprus  lead will be followed by rival banks desperate not to fall behind the market leader.