The increase reached 16%, driven by a better housing market outlook, although it was lower than the 22% that banks had expected. Euro area household mortgage lending rose in the second quarter, marking the first rise since the first quarter of 2022, according to the European Central Bank’s (ECB) bank lending survey. The second-quarter rebound (16%) followed a slight fall in the previous quarter (-3%), but fell short of banks’ expectations for a 22% increase. Among the four largest euro area economies, banks in Germany, Spain and Italy recorded net increases in demand, while in France demand was flat. ‘The improved outlook for the housing market was the main factor boosting mortgage demand,’ the ECB explained, highlighting developments in Germany, where “relatively sharp falls” in prices have improved housing affordability. For the third quarter of 2024, euro area banks expect ‘a strong increase in mortgage demand’ (26%). Banks also reported an increase in consumer credit demand (13%), exceeding expectations (6%), with increases in Spain, Germany and France, while Italy remained stable. For the third quarter, a net increase in consumer credit demand is also expected (7%). On the corporate side, net loan demand decreased again in Q2 2024 (-7%), although the decline was smaller than in the previous quarter. Banks in France and Italy reported a further decline, while those in Germany and Spain recorded increases. The decline in business loan demand in the euro area is mainly attributed to high interest rates and weak fixed investment, with a small positive contribution from inventories and working capital for the first time in six quarters. For the third quarter, banks anticipate a net increase in business loan demand (10%), which would be the first increase since the third quarter of 2022. Credit supply The ECB survey also indicates that euro area banks reported a small net additional tightening (3%) of their credit standards for lending to businesses in Q2 2024, while easing their standards for mortgage lending to households (-6%) and increasing restrictions for consumer credit (6%). For the third quarter of 2024, banks expect moderate tightening for corporate lending and unchanged credit standards for household lending.