Supply contracted across the board in the second quarter of 2026, with a tightening of either lending criteria, the terms applied, or both, depending on the segment.
Reported by Consejeros Editorial Team
The results of the European Central Bank’s (ECB) Bank Lending Survey reveal that, in the second quarter of 2026, lending criteria tightened slightly for both corporate financing and loans to households for the purchase of homes, whilst remaining stable in the consumer and other purposes segment.
Compared with the expectations held by banks three months ago, the trend in lending standards was somewhat more favourable than anticipated, which is thought to be linked to the easing of tensions in the Middle East following the announcement on 15 June of the memorandum of understanding between the United States and Iran towards a possible resolution of the conflict. The percentage of rejected credit applications is reported to have risen slightly for home purchase loans, whilst remaining virtually stable in the other two segments.
Meanwhile, the general conditions applied to new loans tightened in both household segments and remained largely unchanged in the corporate lending segment. For loans for consumption and other purposes, the tightening is reported to have taken the form of interest rate rises, as a result of banks passing on the higher funding costs they have incurred to prices, without this affecting the margins applied. In the case of loans for house purchase, in addition to an increase in interest rates, some institutions also recorded a moderate increase in the margins applied, both for standard loans and for higher-risk loans. According to the banks, the rise in margins was due to a perception of higher risks, although the impact was partially mitigated by the fierce competition in this segment.
Demand for credit
In the second quarter of 2026, demand for credit showed moderate declines in two of the three segments analysed. It fell in the corporate finance segment, affecting SMEs slightly more than large companies, and, in terms of loan tenors, the decline was somewhat greater for long-term loans than for short-term ones. The other segment where demand fell between April and June was mortgage lending, whilst demand for consumer and other loans remained largely unchanged. The trend in demand appears to have been, as in the case of credit criteria, less negative than banks had anticipated three months ago.
According to the banks surveyed, lower investment in fixed capital and higher interest rates are thought to be the factors behind the decline in demand for loans from businesses. Meanwhile, the worse outlook for the housing market and, to a lesser extent, greater use of own funds and higher loans granted by other institutions, are thought to explain the decline in applications in the household mortgage segment.
Outlook for the third quarter
For the third quarter of 2026, the financial institutions surveyed anticipate a moderate tightening of lending criteria for household loans, whilst lending to businesses is expected to remain unchanged. With regard to demand, the institutions anticipate further declines across all three segments.
