Housing loans: are banks planning to tighten their lending criteria?

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In the third quarter of 2021, banks tightened their criteria for granting housing loans, due to the requirements of the amended Recommendation S, but this policy of banks may continue into the fourth quarter of this year. Small and medium-sized enterprises can count on easing credit requirements, while in the case of large enterprises the banks promise to maintain the existing criteria.

According to the NBP’s survey “Situation on the credit market”, in the third quarter of 2021, as many as 41% of banks decided to tighten the criteria for granting housing loans. In turn, 13% of banks eased credit requirements. Some banks introduced changes to credit conditions, such as shortening the maximum loan term and increasing the credit margin. However, it is worth mentioning that the two banks decided to lower the requirements concerning the borrower’s own contribution to the investment.

The banks that took part in the survey indicated as the main reason for the tightening of criteria the requirements of the amended Recommendation S, which shortened the maximum period for which the borrower’s creditworthiness is examined. Another factor that influenced the banks’ decisions were the NBP’s monetary policy decisions. Banks have also announced that they intend to continue tightening the criteria for granting housing loans in the fourth quarter of 2021, which will be associated with a drop in demand for this type of credit.

Loans for entrepreneurs without radical changes

The third quarter did not bring any changes to the criteria for granting short- and long-term loans to large companies. Banks have, however, eased the criteria for short-term and long-term lending to small and medium-sized enterprises. A similar situation is a forecast for the fourth quarter of 2021, as banks intend to maintain their existing policy of easing credit conditions for the SME sector. Banks are also counting on increased demand for short- and long-term loans to large enterprises, while the demand forecast for the SME sector offers the possibility of little change overall on the net.

Relaxed criteria for consumer loans

As in the case of loans to the SME sector, banks decided to relax their criteria for granting consumer loans in the third quarter of 2021. Some banks increased the maximum amount and also extended the loan period. Customers of selected banks could also benefit from a reduced credit margin.

The banks’ policy on consumer loans should also be maintained in the fourth quarter of this year. Banks are counting on an increase in demand for consumer loans and have announced a further easing of lending criteria.

The NBP survey “Situation on the credit market” involved 23 banks whose combined share of receivables from businesses and households in the banking sector’s portfolio is around 88%. The survey was conducted in October 2021 and was addressed to the chairs of banks’ credit committees.