According to the ECB’s October 2025 Bank Lending Survey, euro area banks reported a small, unexpected tightening in credit standards for loans to firms in the third quarter of 2025, while standards for housing loans remained unchanged and consumer credit tightened moderately. The tightening was mainly driven by heightened economic and geopolitical risks and greater sectoral discrimination in new lending decisions.
Loan demand from firms increased slightly but remained weak, supported by lower lending rates and refinancing needs. In contrast, housing loan demand rose sharply again (net 28%), driven by improved housing market prospects and cheaper borrowing. Demand for consumer credit was broadly stable.
Banks reported higher loan rejection rates, especially for consumer credit, and expect credit standards to stay broadly unchanged for firms but tighten further for consumer credit in the next quarter.
Funding conditions were broadly stable, with a slight easing for money market and securitised funding. The ECB’s monetary policy portfolio reduction had a neutral effect on bank liquidity and lending conditions, though banks increased their holdings of euro area sovereign bonds.
Finally, banks continued to see pressure on net interest margins from ECB rate decisions, while loan volumes benefited modestly.
