New methodology leads to downward adjustment of credit growth
In March 2015, mortgage lending to households was down 0.7% on the comparable period last year. This is evidenced by the latest DNB figures on annual growth of bank mortgage lending. These figures were calculated based on a new methodology, which has led to a downward adjustment of the level of credit growth to businesses and households. The use of the new methodology does not or hardly change the underlying trend.
DNB adjusts the growth figures for bank lending to households and non-financial corporations in the Netherlands for the effects of securitisations. Since 1 January 2015, banks in Europe have, however, been reporting additional information on securitised loans. This enables more accurate adjustment of bank credit growth for the effects of securitisation, whereby loans are removed from bank balance sheets. The main improvement is that the new methodology also includes repayments of securitised loans.
Downward adjustment of bank lending
The introduction of the new methodology has led to a downward adjustment of the level of credit growth to businesses and households, but it does not or hardly affect the underlying trend. Based on the improved method, mortgage lending to households ends up 1.5 percentage points lower on average over the years from 2007. This means that based on the new method, mortgage lending in March 2015 shows a 0.7% fall (Figure 1). The downward trend started in early 2013.
Chart 1 - Annual growth of mortgage lending
Business lending is also adjusted downward based on the new methodology, but the impact here is significantly smaller as business loans are securitised to a lower extent than mortgage loans. The improved methodology leads to an average adjustment of 0.7 percentage points in business lending from 2007 onwards. In March 2015 business lending was down 3.6% on the year-earlier period (Figure 2).
Figure 2 - Annual growth of business lending
The ECB has also voiced its intention of implementing the improved methodology in due time. From today, DNB will publish bank credit growth statistics on its website based on the new methodology. In order to provide some flexibility to the users of these figures, DNB will also continue publishing credit growth statistics based on the old methodology for the next three months. The underlying figures used in the article can be found on the page 'Domestic mfi statistics (monetary).