Euro-Zone Reports First Loan Demand Increase Since 2022

European banks have reported the first increase in demand for consumer credit and housing loans since 2022, according to the European Central Bank (ECB).

The Quarterly Bank Lending Survey found demand for housing loans increased by 16%, while demand for consumer credit rose by 13% during the second quarter of 2024.

However, demand for housing loans fell short of banks' expectation of a 22% increase for the second quarter.

According to the ECB, the main driver of the rise in housing loan demand was improved housing market prospects, which was cited primarily by German banks.

Meanwhile, the overall impact of interest rate levels and consumer confidence on demand was comparatively small. In contrast, consumer credit demand benefited from increased spending on durable goods and improved consumer confidence.

Despite the rise in consumer credit and housing loan demand, the report also revealed a continued decrease in firms’ net demand, which was driven by high interest rates and weak fixed investment.

Even though net demand for loans fell by 7% over the second quarter, this decline marked a significant improvement compared to the 28% drop recorded in the previous quarter.

The report also noted a significant divergence among the four largest euro area countries, with French and Italian banks experiencing a continued decline in loan demand, while banks in Germany and Spain reported an increase.

The slight overall decline in net demand aligned closely with banks’ expectations reported in the previous quarter.