When the pandemic seemed to be left behind and only certain doubts remained ahead due to the rise in prices, the war in Ukraine swept away all optimism. Precisely, consumption and prices have been the first victims, but this effect will have consequences on the general economic evolution.
As the OECD has already calculated, growth in the big economies is slowing down. At the same time, a particular trend is observed in the case of housing demand, which, however, will be affected sooner or later, as will happen with mortgages.
For the moment, the Bank of Spain has already observed that the loans have modified their conditions during the first quarter. Rather, the banks tightened the criteria for granting these loans, particularly with regard to companies.
The supervisory body warns that the context is dominated by the greater concern of the entities. The energy crisis and the war in Ukraine have made European banks want to protect themselves a little more against possible adversities.
However, the demand for loans has continued to rise. In fact, this worsening of conditions has not yet reached household financing. It is to be expected that there will be a contraction in supply, of greater intensity in financing for companies, says the Bank of Spain.
Thus, the survey shows a tightening of the criteria for approving loans for companies, while there are no changes in the case of mortgages or consumer loans for households. What’s more, there is a certain relaxation in mortgage conditions.
Going forward, the Bank of Spain’s conclusion is clear: conditions are deteriorating in all segments. In addition, demand will be reduced, as has already been said. This situation contrasts with the rest of the euro zone, but with nuances. Conditions will also worsen in all activity segments. On the other hand, demand for credit by companies is expected to increase, while consumer financing for households will remain stable.
On the other hand, the foreseeable normalization of monetary policy also has an influence. The body directed by Pablo Hernández de Cos says that the favorable effects that the credits have enjoyed may be reduced in the coming months, which influences the conditions of said loans and would also have consequences on demand.
In this sense, we must also take into account the aspect of credit supply, influenced by the war in Ukraine and the change in monetary policy. The financial institutions agree that there will be restrictions on the supply of credit: “They expect a generalized contraction in the supply of credit, of greater intensity in the segment of financing companies, probably as a reflection of the high uncertainty about how the war may affect in Ukraine”.
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