European Central Bank SAFE survey reports first net decline in euro area firms’ bank loan interest rates and slightly weaker loan availability

The European Central Bank published the fourth quarter 2024 results of its Survey on the Access to Finance of Enterprises, showing euro area firms reported a net decline in bank loan interest rates for the first time, alongside a small fall in bank loan availability that widened the perceived financing gap. A net 4% of firms reported lower bank interest rates, versus a net 4% reporting increases in the previous quarter, with SMEs recording a net decrease for the first time in the quarterly series (net 1%) and large firms again reporting a net decline (net 7%). Other conditions tightened slightly, including higher non-interest costs (net 22% reporting increases) and stricter collateral requirements (15%). Needs for bank loans were unchanged overall (net 0%) while availability declined (net 2%), lifting the bank-loan financing gap to net 1%; firms expected a modest improvement in bank loan availability over the next three months (net 2%), though SMEs expected a slight deterioration. The general economic outlook was more often cited as a constraint on external finance (net 22%), while perceived banks’ willingness to lend improved (net 8% overall, net 4% for SMEs and net 15% for large firms). Loan demand remained muted, with 17% applying for bank loans and 6% reporting obstacles among firms for which loans were relevant; internally sufficient funds were the most common reason for not applying (53%). On the real economy, firms reported slightly higher turnover (net 6%) but lower profits (net 14%) and weaker investment momentum (net 4%); median inflation expectations rose 0.1 percentage points to 3.0% at one, three and five-year horizons, with five-year risks still seen as tilted to the upside (51% upside, 16% downside).