First signs of recovery in credit demand for residential mortgages
In the first quarter of 2014, Dutch banks’ perception of the trend in credit demand was more positive than it has been in the past few years. Banks are experiencing a pick-up in demand for residential mortgages, which is expected to continue into the second quarter. Most banks have left their mortgage acceptance criteriaunchanged, whereas one or two of them have tightened their criteria somewhat. This is apparent from the ECB’s latest quarterly Bank Lending Survey.
Banks have also seen demand for corporate loans to large enterprises gain momentum. Credit demand from small and medium-sized enterprises still seems to be lagging behind somewhat. Banks are more optimistic for the next quarter. Acceptance criteriafor loans to large enterprises have remained unchanged at the majority of banks; one or two banks have eased their lending conditions for large enterprises.
For the first time in almost eight years, Dutch banks in the first quarter of 2014 reported a pick-up in demand for residential mortgages (see Chart 1). The improving housing market outlook was stated as the main factor fuelling demand for residential mortgages. On balance, half of the banks expect a further pick-up in the second quarter of 2014.
One or two banks reported to have slightly tightened their acceptance criteria for residential mortgages. The outlook for the housing market was said to have prompted this decision. The last time that banks on balance reported easing of criteria is almost seven years ago. No further tightening is expected for the second quarter, but easing of criteria is not yet anticipated.
In the past two quarters, a shift in acceptance criteria for corporate loans has been discernible. Most banks reported to have left their criteria unchanged, while a very small number reported to have eased their criteria, particularly for loans to large enterprises (see Chart 2). The last time that banks reported to have eased their criteria for loans to small and medium-sized enterprises was in 2005.
The participating banks on balance indicated that their risk perceptions with respect to lendingto small and medium-sized enterprises remained unchanged. Other factors, such as cost of capital or competitive pressure, have not led to changes in credit conditions either. For the second quarter of 2014, a small proportion of Dutch banks expects to further ease their acceptance criteria for corporate loans.
Although banks’ perception of credit demand from small and medium-sized businesses still showed a decline in the first quarter of 2014, it was substantially less pronounced than in the preceding quarters (Chart 3). The decline was primarily observed in the long-term loan segment. For large businesses, banks on balance reported an upturn in credit demand. They expect stable demand for corporate loans in the second quarter.