Euro zone lending holds up even as banks tighten access

What happened

Euro zone lending kept growing in September, with loans to firms up 4.2% and to households up 3.1%, European Central Bank data showed. Banks still made credit harder to get as interest rates rose, and demand for housing loans fell.

Confirmed

Global impact / market context

Banks tightening access to credit while lending still grows means higher borrowing costs are reaching households and companies slowly. If mortgage demand keeps falling and loans get harder to obtain, home spending and business investment could weaken, hurting bank revenue.

Analyst inference

The ECB has raised rates since June to fight energy-driven inflation and is expected to hold at this week's meeting to gather evidence on how higher borrowing costs are affecting the economy. That makes credit data and the lending survey key signals for investors.

Analyst inference

What to watch

1. A net 27% of banks reported lower demand for housing loans in the third quarter, a bigger drop than banks had expected and than they reported in the previous three months. Confirmed
2. Watch whether the ECB continues raising interest rates for months as expected, since higher rates were named the main driver of the decline in mortgage demand, ahead of consumer confidence and housing prospects. Proposed
3. Watch whether banks keep tightening credit access for firms and households; if loan growth slows from September's 4.2% and 3.1% paces, company spending and household purchases could weaken. Analyst inference

Evidence

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