Demand for mortgages flags
The first consequences of increased uncertainty in the economy are reflected in Bank of Greece data on financing conditions for the coming quarter, with a decline in demand for housing loans due to a deterioration in consumer confidence.
Findings on demand from the business side point to things moving in the opposite direction, both concerning investment loans and working capital; this is mainly a consequence of the increased need to cover high operating costs, as well as the production gap of Greek businesses.
The opposite trends in the financing of households and businesses recorded in the quarterly BoG data on the conditions of bank financing do show some signs of resilience in the Greek economy: In contrast with the corresponding findings of the European Central Bank, it is found that banks have not tightened credit criteria, which remain unchanged in Greece from the previous quarters. A similar picture emerges from the rejection rate for loan requests, which has not changed substantially compared to previous quarters; most loan rejections concerned consumer and housing loans, while the rejection rates for business loans were low.
In contrast, the deterioration of economic conditions in the eurozone due to the rise in interest rates is more evident in bank credit, since, as the ECB observes, the intensifying fears of a recession and banks’ declining risk tolerance have had a significant impact on the credit criteria for loans to businesses, which were tightened, paving the way for the coming recession.
Declining demand for mortgages is a phenomenon observed across the eurozone, driven by rising inflation and interest rates, which puts pressure on households’ disposable income, affecting home-buying decisions, as opposed to businesses for which rising operating costs create increased working capital needs.
The estimates of the Bank of Greece on the continuation of credit expansion in the last quarter of the year are in line with the data recently presented to Parliament by the president of the Hellenic Bank Association, Alpha Bank Chairman Vassilis Rapanos, based on which bank loans amounted to 17.5 billion euros in January-August and will exceed €20 billion in 2022.
