Household and corporate credit demand fell in 2022 Q4. Overall credit standards were tightened slightly for households, while corporate credit standards remained broadly unchanged in Q4. Banks expect approximately unchanged credit standards in 2023 Q1. Lending rates increased for both residential mortgage loans and corporate loans in Q4. At the same time, banks reported slightly lower residential mortgage lending margins, while corporate lending margins increased.

Households

Overall, banks reported somewhat lower residential mortgage demand in 2022 Q4 compared with Q3 (Chart 1). Banks expect demand to edge down further in 2023 Q1. Demand for fixed-rate loans remains broadly unchanged. The use of interest-only periods increased somewhat in Q4 and is expected to continue to increase somewhat in Q1.

Banks reported slightly tighter credit standards for households in Q4. Credit standards for first-home mortgages were little changed. Banks reported that the economic outlook contributed to tighter credit standards in Q4. Banks expect credit standards to remain broadly unchanged in Q1. Some banks pointed out that the relaxation of the debt-servicing capacity requirement in the Lending Regulation from 1 January 2023 may make it slightly easier for households to obtain credit ahead. At the same time, some banks pointed out that the new act on financial contracts, which requires banks to refuse to extend credit if customers are not sufficiently creditworthy, may have a slight tightening effect on credit standards ahead.

Overall, banks reported slightly lower residential mortgage lending margins in Q4 (Charts 1 and 2). Banks’ responses regarding lending margins varied. Banks’ funding costs increased somewhat, while there was a fairly substantial increase in lending rates in Q4 (Chart 2). Banks expect funding costs to increase slightly in Q1, while lending rates will increase somewhat. Lending margins are expected to remain broadly unchanged in Q1.

Enterprises

For non-financial enterprises, banks reported slightly lower credit demand in 2022 Q4 and they expect slightly lower credit demand in 2023 Q1 (Chart 3). Credit line utilisation remained broadly unchanged. Banks reported somewhat lower demand for commercial real estate (CRE) loans in Q4 and expect the same for Q1.

Overall corporate credit standards were approximately unchanged in Q4, and banks expect approximately unchanged credit standards in Q1 (Chart 4). Nevertheless, some banks reported somewhat tighter credit standards for CRE firms in Q4 and a number of banks expect the same for Q1. A number of banks reported that both the economic outlook and the sector-specific outlook were factors that contributed in isolation to somewhat tighter credit standards in Q4, and a number of banks expect the same effect in Q1. Banks’ funding situation and risk appetite also contributed in isolation to slightly tighter credit standards in Q4, and a slight tightening effect is also expected in Q1.

Overall, banks reported that lending margins on corporate loans increased slightly in Q4 (Charts 3 and 4). Banks’ funding costs edged up in Q4, while there was a fairly substantial increase in lending rates (Chart 4). Banks expect approximately unchanged lending margins, funding costs and lending rates in Q1.