Household and corporate credit demand increased somewhat in 2025 Q1. Banks reported some easing of credit standards related to first-home mortgages as a result of changes to the Lending Regulations. Corporate lending rates have fallen somewhat more than expected, while lending spreads narrowed slightly. Banks reported a fairly strong increase in competition for corporate loans and a slight increase in competition for residential mortgages. Banks expect broadly unchanged household and corporate demand in Q2.[1]

Households

Overall, banks reported that demand for residential mortgages increased somewhat in 2025 Q1 (Chart 1). Demand for first-home mortgages increased somewhat, while demand for fixed-rate loans fell slightly, following increases in 2024 Q3 and Q4. Banks expect residential mortgage demand to remain approximately unchanged in 2025 Q2 (Chart 2).

Banks reported some easing of credit standards related to first-home mortgages but also a slight easing for households overall (Chart 1). The vast majority of banks refer to changes in the Lending Regulations as a key factor for the easing. In response to questions about how the change to the equity requirement has affected their credit standards, seven out of nine banks reported that although they now provide more first-time mortgages than previously, they have not observed a tendency towards younger first-home buyers. Half of the banks reported somewhat less real collateral for new loans. Banks expect approximately no change in credit standards in Q2.

Chart 1 Residential mortgage demand, credit standards and lending spreads

Chart 2 Residential mortgage demand

Overall, banks reported somewhat lower funding costs for mortgage lending and expect approximately no change in 2025 Q2 (Chart 3). While lending spreads widened slightly in Q1, residential mortgage rates remained broadly unchanged. In Q1, five out of nine banks reported slightly stronger competition, which they expect will continue in Q2. Banks have reported stronger competition for residential mortgages over the past year.

Chart 3 Banks’ operating environment, lending spreads and lending rates. Residential mortgage loans

In response to questions about how banks’ credit assessments are affected by the probability of an increase in costs related to, among other things, home insurance and energy consumption, eight out of nine banks reported that they now give more weight to such costs than previously. Moreover, eight out of nine banks reported that a dwelling’s energy label has a bearing on loan conditions.

Corporates

For non-financial corporates, banks reported a slight increase in credit demand in 2025 Q1 (Chart 4). Credit line-utilisation and demand for fixed-rate loans were broadly unchanged. Despite having expected an increase in demand for CRE loans in Q1, banks reported that the demand was broadly unchanged. In Q2, banks expect broadly unchanged credit demand, from both CRE firms and non-financial corporates as a whole. Overall, banks reported unchanged credit standards in Q1 and expect unchanged credit standards in Q2.

Chart 4 Credit demand, credit standards and lending spreads. Lending to non-financial corporates

Banks reported that corporate lending rates fell somewhat more than expected in 2024 Q4, while lending spreads narrowed slightly in 2025 Q1 (Chart 5). They expect that both lending rates and lending spreads will decline slightly in Q2. Funding costs for corporate loans were approximately unchanged and banks also expect funding costs to remain broadly unchanged in Q2. Moreover, banks reported a fairly strong increase in competition for corporate loans. This increase was more pronounced than expected and higher than in previous quarters. Banks expect competition to continue to strengthen slightly in Q2 and have reported stronger competition for corporate loans since 2024 Q2.

Chart 5 Banks’ operating environment, lending rates and lending spreads. Lending to non-financial corporates

Chart 6 Banks’ assessments of the CRE segment

In this survey, banks were asked about their assessment of the CRE segment over the past six months. Four out of ten banks reported increased CRE sales owing to financial problems among borrowers in 2025 Q1 (Chart 6). Two out of ten banks reported somewhat higher equity ratio requirements for new commercial property mortgages, while two banks reported somewhat lower requirements. Moreover, seven out of ten banks reported a broadly unchanged risk of CRE borrowers defaulting on their loans and a risk of them breaching the terms of loan covenants relating to interest coverage ratios (ICRs). The question about the equity requirement was last posed in 2024 Q1, when four out of ten banks reported higher equity requirements. The questions about banks’ risk assessments were last posed in 2024 Q3, when half of the banks reported somewhat higher levels of both of the aforementioned risks. The fact that more banks reported higher equity requirements and higher risk the previous time the questions were posed may be because the banks that now report unchanged conditions still assess the risk as higher, albeit no higher than since the previous assessment.[2]

Chart 7 Banks’ assessments of real estate developers

In this survey, banks were also asked about their assessments of real estate developers over the past six months (Chart 7). These questions were last posed in 2024 Q3. Half of the banks reported a somewhat higher risk of real estate developers defaulting on their loans. By comparison, in 2024 Q3, six out of ten banks reported higher risk in this segment, two of which reported that the risk had increased considerably. Moreover, four out of ten banks reported a somewhat higher risk of real estate developers breaching the terms of loan covenants relating to both equity requirements and debt-servicing capacity in Q1. By comparison, in 2024 Q3, five out of ten banks reported a somewhat higher risk of breaches to the terms of loan covenants related to equity requirements and six out of ten reported a higher risk related to debt-servicing capacity, two of which reported that the risk had increased substantially. As for the CRE sector responses, the fact that more banks reported higher risk the last time the questions were posed may be because the banks that now report unchanged conditions still assess the risk as higher, albeit no higher than since the previous assessment.

Footnotes

[1] The responses in this survey were submitted in the period between 25 March and 3 April 2025. Five out of ten banks submitted their responses on 3 April.

[2] The question about CRE sales was posed for the first time in this survey.

Correction 30 April 10.50: In the sentence "In response to questions about how the change to the equity requirement has affected their credit standards, seven out of nine banks reported that although they now provide more first-time mortgages than previously, they have not observed a tendency towards younger first-home buyers." the number of banks was changed from ten to nine.