The rate of contraction of the supply of mortgage credit marked a maximum since 2008

MADRID, 25 Oct. (EUROPA PRESS) -

Spanish banks tightened the criteria for granting credit and the conditions applied and registered a fall in the demand for loans in all segments during the third quarter, while for the last quarter of the year it is expected that the contraction in the supply of loans will intensify. credit and the decline in demand, as reflected in the Bank Loan Survey of October 2022 carried out by the Bank of Spain.

In the third quarter of the year, the main Spanish banking entities tightened the criteria for granting loans, mainly due to the increase in the risks perceived by the banks due to the deterioration of the economic outlook and, to a lesser extent, due to the increase in their costs. of financing before the process of normalization of the monetary policy.

The granting criteria tightened most notably in the segment of financing for households for house purchase, which registered the steepest fall in a quarter since 2008, due to the deterioration of the economic outlook and the housing market, the worsening in the creditworthiness of borrowers, lower risk tolerance, higher financing costs and lower availability of funds.

Along the same lines, credit granting criteria were tightened in consumer credit, in this case above all due to the deterioration of the general economic outlook, registering an increase in the percentage of applications for funds denied in the third quarter.

In the business segment, the criteria were tightened for both SMEs and large companies and, along these lines, the percentage of applications for funds denied to companies also increased.

The tightening of the conditions applied to loans materialized through an increase in cost, although in most segments said cost rose more slowly than market interest rates did, which led to a margin narrowing.

While supply contracted, demand for loans fell in all segments, due to rising financing costs and, in the case of households, lower consumer confidence, which was influenced by the increase in uncertainty, as reflected in the results obtained by the Bank of Spain.

Looking ahead to the fourth quarter of 2022, the financial institutions participating in the supervisor's survey expect that, once again, there will be a generalized contraction in credit supply and demand, in a context of deteriorating macroeconomic prospects and in the that the process of normalizing monetary policy is expected to continue.

As for credit to households, the banks anticipate that in the last part of the year the pace of decline in the supply and demand for loans will intensify, both for house purchases and for the purchase of consumer goods.

Similarly, in the business segment, Spanish entities predict that the pattern of tightening of the criteria for granting loans will be accentuated as well as the fall in demand.

In another order of things, the Bank Loan Survey shows that Spanish financial institutions perceived a deterioration in the conditions for access to retail and wholesale financing markets in the third quarter.

As for the 'ad hoc' questions about the impact of the unconventional monetary policy measures adopted by the European Central Bank (ECB), the results show that the end of net purchases in the framework of asset purchase programs of the Eurosystem would have led, both in Spain and in the euro zone, to a slight negative impact on the financial situation of credit institutions and on their conditions of access to financing during the last six months.

The Spanish banks indicated that, by abandoning the negative values ​​in July, the remuneration of the deposit facility favored a slight increase in their profitability, contrary to what was declared by the entities of the euro area, which indicated that the remuneration of the deposit facility deposit between April and September had an adverse impact on its profitability.

Regarding the effect of the funds obtained in the longer-term financing operations with a specific objective (TLTRO), the financial entities of both areas reported that they would have continued to favor a moderate increase in their profitability and an improvement in their financing conditions. , although the impact was less intense than six months ago.

According to the Spanish entities, the impact of these three measures on the credit policy and the volume of financing granted would already be "very little or nil".