Demand for loans is rising in the euro zone despite higher official interest rates, figures showed today.
The latest European Central Bank (ECB) survey of lenders showed demand for both business and household loans increased in the second quarter of 2006, continuing a trend begun early last year, with business lending in particular accelerating strongly.
Demand was expected to increase further in the third quarter, the survey of 85 banks around the 12 countries sharing the euro showed.
Consumer credit was helped by improved confidence. However, the pace of growth in mortgage lending eased somewhat in the second quarter, suggesting the upwards path of interest rates may be starting to bite in some sectors.
The ECB has tightened credit costs steadily since the end of last year, with a fourth rate rise on Thursday taking official rates to 3.0 per cent, the highest in more than three-and-a-half years.
The survey, done in July, suggests some banks have been slow to pass the increases on to customers. One in three banks reported narrower margins on average corporate and home loans in the second quarter, and the ECB said margins shrank on balance.
This is in line with separate figures showing that rates on most new loans in May did not fully reflect official increases.
Lower margins were reflected in an easing in credit standards for home buyers and consumers, although standards for business loans were largely unchanged.
The survey showed investment plans were a main driver for the resilience of credit demand among companies. Sixty-eight per cent of banks reported no change in loan demand in the second quarter, and 27 per cent said demand rose.
Half the banks surveyed reported no change in demand for home lending, which is expanding at more than 11 per cent a year, one in four said demand rose, and one in four said it fell, a small increase on the previous quarter.
New questions about property investment and second homes showed that these loans were not a significant part of the lending portfolio for most banks, with 50 per cent of respondents saying they accounted for less than 10 per cent of business.