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Demand for home loans in the euro area weakened at its fastest pace in three years in the third quarter, according to a European Central Bank survey released Tuesday, as higher interest rates and weaker consumer confidence weighed on would-be buyers.
The ECB’s bank lending survey showed a net balance of minus 27% for housing-loan demand, compared with minus 15% in the second quarter. That was the weakest reading since the third quarter of 2023 and a larger decline than banks had expected.
The figure does not mean the number or value of mortgages fell 27%. It is a survey balance: the share of banks reporting increased demand minus the share reporting decreased demand. A negative figure means more banks saw demand fall than rise.
Borrowing costs weigh on households
Banks cited interest rates as the main force reducing mortgage demand, followed by declining consumer confidence and a worse outlook for housing markets. Demand for consumer credit also fell slightly, with banks pointing to higher rates, weaker confidence and less spending on durable goods.
Housing-loan approval standards were broadly unchanged in the third quarter. But that did not mean borrowing became cheaper: banks reported tighter overall loan terms, driven mainly by higher interest rates. Banks also reported an increase in the share of rejected applications across housing, consumer and business loans.
For the fourth quarter, banks expect mortgage demand to weaken further and housing-loan approval standards to tighten. Those responses describe banks’ expectations, not a completed decline in lending.
Businesses also pull back
Companies’ demand for loans slipped to a net balance of minus 6%, reversing a small increase in the previous quarter. Banks said the general level of interest rates was the main drag. Weaker demand for fixed investment among small and medium-sized firms also weighed on borrowing.
At the same time, a net 9% of banks reported tightening credit standards for companies, up from 7% in the second quarter. Banks cited greater perceived risks and less willingness to take risk, with some pointing to geopolitical uncertainty and energy-market developments.
Conditions were not identical across the region. Banks in France and Germany reported tighter standards for companies, while standards eased in Italy and were unchanged in Spain.
A survey of credit conditions, not a rate decision
The ECB collected the survey responses between September 21 and October 6. The survey asks senior loan officers about demand and lending conditions; it is not a new policy-rate decision.
Its household message is that the cost of financing can hold back a home purchase even when banks have not formally raised their approval standards. For businesses, more expensive credit and greater caution at banks can make new investment harder to finance.
JBizNews Desk | Frankfurt
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