Banking tightens mortgages and credit “considerably” | companies

by time news

Spanish banks have further tightened the conditions for granting mortgages, consumer credit and loans to companies during the third quarter of the year. This is reflected in the Bank Loan Survey published yesterday by the European Central Bank (ECB), in which the sector also points to a contraction in demand and further tightening at the end of the year due to the uncertainty due to the economic deterioration and the continuous rise in rates.

“In the context of the economic slowdown and recession fears, risks related to the economic outlook, the specific situation of the industry and companies and the lower risk tolerance of banks had a considerable hardening impact in credit standards”, explains the ECB.

Specifically, 50% of Spanish banks stated that they had increased the requirement levels to grant credit to companies for the fourth consecutive quarter due to the increased risk of defaults. However, the ECB warns of a slight narrowing of the margins of the entities, since the increase in the reference market rates have not been completely transferred to the interest rates of the loans.

In regards to the loans for homes, the tightening of mortgage conditions (50% of banks acknowledge having applied them) has caused the steepest drop in demand since 2008. The supervisor points out that this negative evolution is explained by the increase in risks perceived by banks due to worsening economic conditions and the housing market, and, to a lesser extent, due to doubts about customers’ solvency.

Equally, 42% of entities also claim to have raised the criteria granting of consumer loans to households in the third quarter. As in mortgages, the main reason pointed out by the ECB is the increase in perceived risks, the worsening in the solvency of clients and the increase in risks related to the guarantees requested.

Looking ahead to the final stretch of 2022, the banks that have participated in the European supervisor’s survey expect that, again, there is a general contraction in supply and the demand for credit in all segments (mortgages, consumer credit and loans to companies) and which could be even more pronounced than that registered between July and September.

Talking about the EU, banking policies Regarding the granting of credit, they have been in line with the Spanish entities. In this way, 19% of banks have tightened the conditions of loans for companies, 32% recognized an increase in the requirements to grant mortgages and 21% found a tightening in consumer loans.

Banking supervisors are monitoring customers’ ability to pay due to fears of excessive indebtedness due to the sharp rise in prices due to the energy crisis. the war in Ukraine and interest rate hikes.

You may also like

Leave a Comment