According to the European Central Bank the single currency block faces cloudy perspectives for mortgage lending. Indeed, though M3 lending increased by 0.7% in April, annual growth is still slightly negative at 0.1%. As for one of the key components of the M3 release, lending for home purchase, it increased by 0.2 % in April at the Euro area level, marking the twelfth consecutive monthly increase and pushing the annual growth rate up to 3%, the highest since October 2008.

The situation in the Euro zone regarding mortgage lending is currently characterised by stark and sometimes even surprising contrasts. Indeed, Ireland is the only country of the single currency area where annual growth in mortgage lending is still negative (-5%). On the other hand, other countries where a similar trend was expected, such as Spain or Greece, are in fact showing the opposite (with an annual growth at 0.5% and 4.6% respectively).

Renewed financial market turbulence and the recently announced fiscal austerity measures across the euro area are only partly reflected in the ECB data. However, this negative news flow is already mirrored in the May business and consumer confidence data, foreshadowing a bleaker outlook for mortgage lending as well: the European Commission’s economic sentiment index fell from 100.6 to 98.4 in May and the headline consumer confidence net balance fell from -15 in April to -18 in May. However, the consumer confidence net balance for the expected economic situation sharply decreased from -12 to -21, potentially signalling uncertain times for mortgage lending in the euro area.

Joshua Miller, RICS Economist commented:“Annual growth in mortgage lending is positive across all but one country in the euro area, however the May survey data signals the risks to the outlook are shifting to the downside.

Source: RICS