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UPDATE 1-Euro zone mortgage, credit and corporate loan demand rising-ECB
July 14, 2015 / 9:59 AM / 2 years ago

UPDATE 1-Euro zone mortgage, credit and corporate loan demand rising-ECB

* Half of euro zone banks see rising demand for mortgages

* Demand for consumer credit and corporate loans also up

* ECB says low interest rates, better outlook main drivers (Adds detail)

By Francesco Canepa

FRANKFURT, July 14 (Reuters) - Demand for mortgages, consumer credit and corporate loans in the euro zone rose in the second quarter, fuelled by low interest rates, and banks expect a further rise in demand in the third quarter, the European Central Bank said on Tuesday.

The ECB launched a 60-billion euros ($66 billion) a month asset-buying programme in March to stimulate inflation and lending, and rising demand for borrowing indicates that economic growth is gaining momentum.

The bank’s quarterly Bank Lending Survey of 142 of the euro zone’s largest banks, showed its ultra-easy monetary policy was starting to fuel demand for corporate loans, although the biggest impact was seen in housing loans and consumer credit.

A net 13 percent of banks reported an increase in demand for loans to companies, up from 1 percent in the previous quarter.

By comparison, a net 49 percent saw growth in demand for mortgages, up from 30 percent three months earlier.

“For housing loans, the low level of interest rates and housing market prospects were the main factors contributing to strong demand,” the ECB said in the report.

“The increase in demand is well above the historical average change in demand and again exceeded banks’ expectations from the previous survey round,” it said.

Among the largest euro zone economies, the Netherlands and Italy saw the largest proportion of banks reporting a rise in demand for mortgages at 100 percent and 88 percent respectively.

Appetite for consumer credit also rose, with a net 41 percent of respondents recording a yearly rise in demand, up from 12 percent in the previous three months, mirroring an improvement in consumer confidence and willingness to spend.

“Among the factors underlying demand at the euro area level, financing needs for spending on durable consumer goods further contributed to the increase in demand,” the ECB said.

On the supply side, credit standards for mortgages were loosened, reversing a slight tightening in the previous quarter, and standards for consumer credit continued to eased.

Credit standards for companies also eased further, albeit at a slower pace compared to the previous quarter.

For the third quarter of 2015, banks expect no change in standards on loans to enterprises, an easing for consumer credit and a net tightening of standards on housing loans. (To read the full report, click on: here) (Editing by John O'Donnell and Louise Ireland)

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