FRANKFURT (Reuters) – The number of euro zone households applying for loans rose for the first time in two years, a survey by the European Central Bank showed on Tuesday, as the economic outlook improved and rates declined.
In the second half of the year, 16% of banks surveyed in the ECB’s Bank Lending Survey reported an improvement in household demand for credit, the first increase since 2022, and added that they expected the trend to continue this quarter.
“A better outlook on the housing front, a factor cited mainly by German banks, was the main driver of the increase in mortgage lending. The level of interest rates and consumer confidence had a less significant positive impact,” the ECB notes.
Mortgage lending conditions eased for the second consecutive quarter, reflecting strong competition, but banks tightened conditions for consumer credit, which is considered riskier.
Conversely, corporate lending conditions continued to tighten, albeit modestly, as demand continued to decline.
This tightening was “relatively significant” for commercial real estate companies, a sector identified by the ECB as the “weak link” in European finance.
“In the second half of 2024, euro area banks expect a significant tightening of credit conditions, as well as a modest increase in demand for loans in most sectors, except construction and commercial real estate,” the ECB summarises.
(Reporting by Francesco Canepa, by Corentin Chappron, edited by Kate Entringer)
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