Slightly higher margins on residential mortgage lending
- Survey of Bank Lending
Overall, banks reported that credit demand from households and non-financial enterprises was approximately unchanged in 2021 Q2. Credit standards and loan conditions were also largely unchanged. Banks expect little change ahead in credit demand, credit standards and loan conditions. Banks’ margins on existing residential mortgage loans rose slightly in Q2, and funding costs were somewhat lower. Lending margins on new loans to non-financial enterprises fell a little, and banks reported slightly stronger competition. Margins on residential mortgage loans and corporate loans are expected to edge down ahead.
Banks reported that more customers than normal in the household segment have increased their bank deposits through 2020 and in the period to the end of 2021 Q2. Interest in other savings products has also increased. The rise in bank deposits may have contributed to somewhat higher credit demand.
Banks reported that residential mortgage demand was approximately unchanged in 2021 Q2 (Chart 1). In the period ahead, banks expect a slight increase in demand for fixed-rate mortgages, which account for a small share of residential mortgages. Overall, demand is expected to remain unchanged.
Credit standards for households were largely unchanged in Q2, and banks expect no change in Q3 (Chart 1). The use of interest-only periods by households fell slightly in Q2 and is expected to continue to fall slightly in Q3. Other loan conditions were unchanged.
Banks’ margins on existing residential mortgage loans rose slightly in 2021 Q2 (Charts 1 and 2), reflecting slightly lower funding costs in Q2. Banks expect funding costs and lending rates to rise a little ahead. Margins are expected to edge down in Q3.
Almost all banks reported that more customers than normal have increased their bank deposits through 2020 and in the period to the end of Q2 (Chart 3). Nearly half of the banks reported that fewer customers than normal have reduced their bank deposits in the same period.
In parallel with the increase in bank deposits, almost all banks reported that customers have also shown growing interest in other savings products. A number of banks reported higher saving generally across all customer segments, citing reduced consumption opportunities owing to Covid-related restrictions. Others cited higher saving especially by customer groups with a strong financial position. Some banks reported that increased bank deposits may have led to higher credit demand.
Banks reported broadly unchanged demand for credit from non-financial enterprises (Chart 4). Demand for fixed-rate loans, commercial real estate loans and credit line utilisation was also unchanged. Banks expect no change ahead. Nor was there any change in overall credit standards or loan conditions.
Banks’ margins on new loans to non-financial enterprises fell a little in Q2 (Charts 4 and 5), reflecting slightly stronger competition. Banks expect the slightly more difficult competitive situation to persist ahead. Margins are expected to edge down in Q3.
Banks varied somewhat in their responses to the question of whether there are any industries where enterprises have recorded a particularly large increase in their bank deposits or particularly large drawdowns on liquid assets (bank deposits). A majority did not cite any particular sector. Some banks cited large drawdowns on liquid assets by hotel, restaurant and tourism enterprises. Some banks reported that increased bank deposits may have led to lower credit demand.
 The survey was conducted in the period 21 June to 13 July 2021.
In its work on monitoring financial stability in Norway, Norges Bank uses extensive statistics on developments in credit and financial markets. In order to expand the information base, Norges Bank conducts a quarterly survey of bank lending. The survey provides information on changes in the demand for and supply of credit and on changes in banks’ loan terms and conditions. Objective of the Bank Lending Survey