Central Bank of Iceland lending survey signals steady household loan supply and slightly stronger corporate credit

The Central Bank of Iceland published results from its quarterly lending survey of the four commercial banks, based on responses collected from 1 to 14 April 2025. The survey indicates unchanged household loan supply and lending rules over the past three months, with banks expecting a slight increase in the supply of residential mortgages and continued modest growth in corporate credit supply over the next six months. Banks reported marginally lower household mortgage demand in the past three months, with a slight increase expected ahead, while competition for household lending is expected to intensify. Interest rates on inflation-indexed household loans rose slightly over the past three months but are expected to fall over the next six months due to lower funding costs, even as interest premia are expected to widen; non-indexed household loan rates fell and are expected to keep declining, driven mainly by key rate cuts and lower funding costs, with the regulatory framework also expected to weigh on rates. On the corporate side, demand from small businesses was unchanged, while large companies saw lower demand for short-term loans and higher demand for foreign-denominated loans, which banks expect to keep increasing; corporate lending standards are expected to remain unchanged, but competition is expected to increase marginally, including from market funding. Corporate loan pricing was also reported to be easing for most categories, with banks expecting slightly lower rates on indexed and non-indexed loans over the next six months, while foreign-denominated loan rates are expected to remain unchanged.