Broadly unchanged credit demand, but higher corporate lending margins
- Survey of Bank Lending
Household and corporate credit demand was broadly unchanged in 2023 Q1. Banks expect slightly lower demand from corporates in Q2. Overall credit standards were approximately unchanged in Q1, and banks expect the same in Q2. Banks reported a slight increase in the use of interest-only periods on loans to households. Banks reported higher lending margins on corporate loans in Q1, while margins on residential mortgage loans were broadly unchanged.
Overall, banks reported broadly unchanged lending margins on residential mortgages in Q1, while banks’ funding costs and lending rates increased somewhat (Charts 1 and 2). For Q2, banks expect funding costs and lending rates to continue to increase somewhat and lending margins to decrease slightly.
In this survey, banks were also asked about developments in new residential mortgage loans. Five out of ten banks reported that the debt-servicing capacity of households that took out new loans edged down in Q1, and three banks expect some decline in Q2 (Charts 3 and 4). Four banks reported that the use of interest-only periods for new loans increased somewhat in Q1, and two banks expect some increase in Q2. No banks reported changes in repayment periods. Few banks reported changes in loan-to-value or debt-to-income ratios.
In this survey, banks were also asked about the use of interest-only periods on existing loans. Four banks reported that the use of interest-only periods has edged up in Q1, while one bank reported that it has edged down (Chart 5). For Q2, three banks expect some increase in the use of interest-only periods.
For non-financial corporates, banks as a whole reported unchanged credit demand in 2023 Q1 (Chart 6) and they expect slightly lower demand in Q2. Credit line utilisation, demand for fixed-rate and commercial real estate loans were also approximately unchanged in Q1 and banks expect the same for Q2.
Overall, banks reported unchanged credit standards for non-financial corporates in 2023 Q1 and expect unchanged credit standards in Q2. Nevertheless, some banks reported somewhat tighter credit standards for commercial real estate (CRE) firms in Q1. A number of banks reported that the economic outlook, the sector-specific outlook and banks’ funding situation were factors that contributed in isolation to somewhat tighter credit standards in Q1. For Q2, banks also expect these factors to contribute to somewhat tighter standards.
Overall, banks reported that lending margins on corporate loans increased substantially in Q1 (Charts 6). At the same time, banks’ funding costs and lending rates increased (Chart 7). For Q2, banks expect approximately unchanged lending margins and a continued increase in funding costs and lending rates.
In this survey, we also asked banks if their assessment of the CRE segment had been affected by economic and financial market developments over the past six months. Their responses are consistent with somewhat tighter credit standards for CRE firms (Chart 8). The majority reported increased margins on new commercial property mortgages and higher equity requirements for new loans to CRE firms. Furthermore, most of the banks reported a somewhat higher risk that CRE borrowers will breach loan contract terms.
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