The Central Bank of Cyprus has tightened its guidelines for the commercial banking sector on lending to finance the purchase of second homes. With the aim of avoiding excessive property lending by commercial banks, the CBC has instructed them to limit loans for second homes to 60% of the value of the property – down from 70%. Banks may lend up to 80% of the value of a first home. Bank lending has increased by almost 25% over the past year and the CBC's action aims to shield commercial banks from excessive exposure, and thus avert the possibility of a US-style credit crunch.
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