Euro area banks unexpectedly tightened their internal lending rules for business loans in the final quarter of 2025, while easing slightly for mortgages and tightening further for consumer credit.
A net 7% of banks reported tighter credit standards — meaning loan approval criteria — for loans or credit lines to enterprises in the fourth quarter of 2025, according to a survey published by the European Central Bank (ECB) on Tuesday.
Credit standards eased slightly for loans to households for house purchase, with a net -2% reporting easing, while a net 6% reported further tightening for consumer credit and other household lending.
Banks said tougher standards for firms were driven by concerns about the outlook for companies and the wider economy, alongside lower risk tolerance. Competition helped to ease standards for housing loans, but higher risk perceptions pushed in the opposite direction.
A larger share of loan applications was rejected for firms and consumer credit in net terms, while rejection rates for housing loans were unchanged overall.
Demand edges up for firms and mortgages
Demand for loans or credit lines to firms rose slightly in the fourth quarter, with a net 3% of banks reporting an increase.
Banks said demand was mainly linked to inventories and working capital, while fixed investment made a neutral contribution overall.
Demand for housing loans continued to rise, but at a slower pace, with a net 9% of banks reporting an increase. Banks cited improved housing market prospects as the main driver, while consumer confidence weighed on demand.
Demand for consumer credit slipped slightly, with a net -2% reporting a decline, as lower consumer confidence outweighed the continuing positive contribution from the level of interest rates, the ECB said.
Looking ahead, banks expect a further tightening of credit standards in the first quarter of 2026 — moderate for business loans, slight for housing loans and more marked for consumer credit — and they expect loan demand from firms and households to increase, according to the survey.
Trade policy changes and related uncertainty also tightened credit standards and dampened demand for business loans.
