According to the October 2024 bank lending survey (BLS), euro area banks reported unchanged credit standards – banks’ internal guidelines or loan approval criteria – for loans or credit lines to enterprises in the third quarter of 2024 (net percentage of banks of 0%; Chart 1). Banks also reported a further net easing of their credit standards for loans to households for house purchase (net percentage of -3%), whereas credit standards for consumer credit and other lending to households tightened further (net percentage of 6%). For firms, the net percentage was lower than expected by banks in the previous survey round, although risk perceptions continued to have a small tightening effect. For households, credit standards eased somewhat more than expected for housing loans, primarily because of competition from other banks, and tightened more than expected for consumer credit, mainly owing to additional perceived risks. For the fourth quarter of 2024, banks expect a net tightening of credit standards for loans to firms and consumer credit and a net easing for housing loans.
Banks’ overall terms and conditions – the actual terms and conditions agreed in loan contracts – eased strongly for housing loans and slightly for loans to firms, while moderately tightening for consumer credit. Lending rates and margins on average loans were the main drivers of the net easing for loans to firms and housing loans, whereas tighter consumer credit terms and conditions were mainly attributable to margins on both riskier and average loans.
For the first time since the third quarter of 2022, banks reported a moderate net increase in demand from firms for loans or drawing of credit lines (Chart 2), while remaining weak overall. Net demand for housing loans rebounded strongly, while demand for consumer credit and other lending to households increased more moderately. Lower interest rates drove firms’ loan demand, while fixed investment had a muted effect. For housing loans, the net increase in housing loan demand was mainly driven by declining interest rates and improving housing market prospects, whereas consumer confidence and spending on durables supported demand for consumer credit. In the fourth quarter of 2024 banks expect net demand to increase across all loan segments, especially for housing loans.