ECB lending survey: banks tighten for firms again, housing loan demand falls 27%

Serguey Asael Shinder28 October 2026, 09:262 min read

Euro area banks tightened credit standards for loans to firms again in the third quarter of 2026, according to the ECB's October bank lending survey. A net 9% of banks reported tighter standards for corporate loans, more than the 5% they had expected in the previous round. Standards for housing loans were unchanged in net terms (0%), and a net 14% tightened for consumer credit and other household lending. Banks cited higher risk perceptions and lower risk tolerance, with some pointing to geopolitical uncertainty and energy developments. Terms and conditions tightened for all segments, mainly through higher interest rates, and the share of rejected applications rose for every borrower group.

Demand weakened across the board. Net demand for loans to firms fell to -6%, against an expected increase of 4% and after a small rise of 3% in the second quarter; the general level of interest rates was the main drag. Demand for housing loans fell by a net 27%, after -15% in the second quarter and more than the -12% banks had expected. The ECB notes that the decline, though substantial, remains well below the peak of the previous hiking cycle, and calls the interest-rate contribution consistent with smooth transmission of policy rates.

For the fourth quarter, banks expect standards to tighten further for firms and to tighten significantly for housing loans and consumer credit. In a special question, banks reported a gradual but sustained rise in demand for loans to finance AI infrastructure, especially data centres, and said their AI-related lending targets infrastructure providers more than software developers or AI adopters. Most have not yet set quantitative criteria for assessing such loans.

What it means

Tighter supply and weaker demand together are the textbook signature of policy working through the banking system, and the ECB says as much. The forward-looking line matters most: banks expect "significant" tightening for mortgages next quarter, which points to a further squeeze on housing credit regardless of what happens to policy rates in the meantime.