European Central Bank bank lending survey shows unexpected net tightening in corporate credit standards and sustained strength in housing loan demand

The European Central Bank published its October 2025 euro area bank lending survey, showing a small net tightening of banks’ credit standards for loans and credit lines to enterprises in the third quarter of 2025, while standards were unchanged for housing loans and moderately tighter for consumer credit. Loan demand from firms rose slightly but remained weak overall, whereas demand for housing loans continued to increase strongly. For corporate lending, the net tightening of credit standards was 4%, following broadly unchanged standards in the previous quarter and contrary to banks’ earlier expectations. Tighter standards were mainly linked to perceived risks to the economic outlook, with banks also citing high geopolitical uncertainty and trade risks as reasons for greater sector and firm differentiation, alongside intensified monitoring. Credit standards were unchanged for loans to households for house purchase (0%), and consumer credit tightened by 5%, broadly in line with expectations and driven mainly by banks’ risk perceptions. Overall terms and conditions were broadly unchanged for firms but eased for housing loans and consumer credit, while the share of rejected applications increased across all categories, most notably for consumer credit and, for housing loans, for the first time since the first quarter of 2024. Looking to the fourth quarter of 2025, banks expect credit standards to remain broadly unchanged for firms, tighten slightly for housing loans and tighten further for consumer credit. They also anticipate unchanged corporate loan demand, a further net increase in housing loan demand that is more moderate than in previous quarters, and a small increase in consumer credit demand.