FRANKFURT, Oct 27 (Reuters) – Lending in the euro zone continued to grow at a healthy pace in September even as banks tightened access to credit on the back of higher interest rates and geopolitical turmoil, European Central Bank data showed on Tuesday.
The ECB has been gradually raising rates to stem an energy-driven rise in inflation, although it is expected to stay put at this week’s meeting to garner more evidence on how higher borrowing costs, including on the bond market, are affecting the economy.
The central bank’s own data painted a picture of relative resilience: lending to firms and households grew by 4.2% and 3.1% respectively last month, a stable pace when compared to August.
However, the ECB’s quarterly Bank Lending Survey showed the impact of its rate hikes, which started in June and are expected to continue for months, was becoming visible, with demand for mortgages falling and credit becoming harder to get.
A net 27% of banks reported a decrease in demand for housing loans in the third quarter of the year, a more pronounced decline than lenders had expected (-12%) and than they had reported in the previous three months (-15%).
“Increases in interest rates were the main driver of the decline, followed by falling consumer confidence and worsening housing market prospects,” the ECB said in a press release.
Banks did not raise the bar for granting mortgages during the quarter although they did so for corporate loans and consumer credit. They expect to tighten standards for all types of lending in the last three months of the year.
France, which is at the centre of bond market turmoil over its public finances, was the large European country where such tightening was most pronounced.
“Heightened risk perceptions and banks’ reduced risk tolerance remained the main drivers of tighter credit standards, with some banks reporting increasing pressure as a result of geopolitical uncertainty and energy developments,” the ECB said.
(Reporting by Balazs KoranyiEditing by Francesco Canepa and Susan Fenton)

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