Home loan? Banks tightened standards for individuals in the first quarter

While lending to businesses in the first quarter of this year has maintained the same standards, the same cannot be said for individuals. According to the Bank of Albania, the tightening of lending standards for individuals was applied only to loans for the purchase of housing, influenced by a single bank of the system. On the other hand, credit standards were eased in consumer loans.

The tightening of standards was based on the banks' perception of current and expected developments in the housing market and the interest rate environment. On the other hand, the Central Bank considers that the increased pressure from competition in the banking system and the banks' perception of lower risk related to the solvency of borrowers continue to be supporting factors for the easing of lending standards for individuals.

Meanwhile, the easing of terms and conditions for consumer loans was achieved thanks to the increase in the size of the loan and the extension of the loan maturity only in loans granted for the purpose of financing consumption. Conversely, higher margins set by banks and higher collateral requirements in home loans had a tightening effect on credit terms and conditions for individuals.

The rate of approval of loans to individuals was reported to increase in the first quarter of 2024. The lower ratio of rejected loans in this quarter was driven by all indicators related to the solvency of the borrower, with the framework of the banks' policies , as well as with the credit history.

Individuals' demand for loans was perceived to be higher in the first quarter, both for housing purchase loans and for consumer loans.

The higher demand for financing consumption and that for financing the purchase of housing were the main factors that brought the increase in the demand for loans in this quarter. Meanwhile, in the second quarter of 2024, banks expect the demand for loans to be high again, both in financing consumption and in the purchase of housing.