The European Central Bank published its euro area bank lending survey for the first quarter of 2025, indicating a small net tightening of credit standards for loans to enterprises, a renewed easing for housing loans, and a further tightening for consumer credit. Demand conditions diverged, with firms’ loan demand turning slightly negative again while mortgage demand increased strongly. For enterprises, banks reported a net 3% tightening of credit standards, mainly driven by higher perceived risks, while terms and conditions eased (net -10%) on the back of lower lending rates and narrower margins. Rejection rates were broadly unchanged for large firms but increased for small and medium-sized enterprises, and net demand decreased slightly (net -3%), largely reflecting weaker inventory and working-capital financing needs. For housing loans, credit standards eased (net -7%) and terms and conditions continued to ease strongly (net -17%), with a slight decline in rejection rates and a strong rise in demand (net 41%). For consumer credit, credit standards tightened further (net 3%) and terms and conditions tightened (net 8%), while demand increased moderately (net 10%). Banks expect credit standards to tighten across all three segments in the second quarter of 2025 (net 5% for enterprises, 7% for housing loans and 7% for consumer credit), alongside higher demand for all segments (net 4%, 20% and 6% respectively). Ad hoc results showed slightly improved access to wholesale funding in the first quarter of 2025, while the reduction in the ECB’s monetary policy asset portfolio had a small negative impact on banks’ market financing conditions and liquidity positions but a broadly neutral impact on lending conditions and volumes. Banks also reported that non-performing loan ratios and other credit quality indicators had a tightening impact on lending conditions for firms and consumer credit, and that ECB key interest rate decisions continued to weigh on net interest margins and overall profitability over the past six months, with similar negative effects expected over the next six months.
European Central Bank 2025-04-15
European Central Bank bank lending survey shows modest tightening in corporate credit standards and strong mortgage demand
The European Central Bank's euro area bank lending survey for Q1 2025 shows a slight net tightening of credit standards for enterprise and consumer loans, while housing loans saw an easing. Demand for enterprise loans decreased slightly, mortgage demand rose strongly, and consumer credit demand increased moderately. Banks anticipate further tightening of credit standards across all segments in Q2 2025, with higher demand expected.