Central Bank of Iceland publishes lending survey and revises corporate loan rate reporting by indexation and currency

The Central Bank of Iceland published its quarterly lending survey of the four commercial banks, based on responses collected 2-14 January 2025, and changed its lending-rate question to split corporate loans into price-indexed, non-indexed and foreign-denominated categories. The survey indicates that the supply of household mortgage loans contracted slightly over the past three months and is expected to remain unchanged over the coming six months, while demand for mortgages, car loans and other non-real-estate-backed lending edged down but is expected to rise slightly for mortgages and car loans. Mortgage lending rules tightened over the past three months and are expected to tighten further, with access to market funding and management of interest rate and indexation imbalances cited as key drivers; competition for household loans is expected to increase somewhat. On pricing, indexed household loan rates rose while interest premia fell slightly, and respondents expect indexed rates to decline over the next six months, whereas non-indexed household loan rates fell and are expected to keep falling. For corporates, credit supply was unchanged and lending rules were stable, with both supply and demand expected to increase slightly over the next six months; competition is also expected to intensify marginally versus banks, non-bank lenders and market funding. Respondents reported divergent recent and expected movements across indexed, non-indexed and foreign-denominated corporate lending rates, with funding costs, policy rate developments, the real policy rate and the regulatory environment cited as key influences.