More expensive and harder to obtain loans: banks prepare to tighten home loan approvals

The rise in interest rates is impacting the banking credit market, with stricter lending conditions expected to persist through the end of 2026. According to the ECB's latest Bank Lending Survey, banks are tightening requirements for loans to households and businesses, particularly for consumer credit. The survey indicates that banks are passing on increased financing costs to borrowers, leading to less favorable terms. Demand for loans has decreased across all segments, with a notable drop in mortgage applications. Additionally, the survey highlights that artificial intelligence has had minimal impact on credit demand or lending policies so far.