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The criteria for consumer loans are also tightened. Banks perceived more risk

2024-07-20 11:55:53Biznes SHKRUAR NGA REDAKSIA VOX

The criteria for consumer loans are also tightened. Banks perceived more risk

Getting a bank loan to buy a house has become somewhat more difficult, while the same trend seems to continue during the year. In the survey of the Bank of Albania on lending activity in the second quarter of the year, it is emphasized that lending standards for individuals were somewhat tightened, dictated only by a single bank of the system. The tightening of standards was reported both in consumer loans and in those for the purchase of housing.

According to the Central Bank, the factors influencing the tightening of lending standards for individuals were the reported risk perception on the solvency of the borrower, on the current and expected developments in the housing market, as well as the costs and limitations from the banks' liquidity position. On the other hand, the increased pressure from competition in the banking system continues to influence the easing of lending standards for individuals.

Lending standards for individuals are expected to remain tight even in the third quarter of 2024, both in loans for the purchase of housing and those for financing consumption.

As for the general conditions and terms for loans granted to individuals, they remained completely unchanged in the second quarter. Credit terms and conditions for the purchase of housing were reported to be slightly tighter, while those for financing consumption were reported to be eased. In the facilitating direction, the increase in the size of the loan was reported. In contrast, the higher margins set by the banks and the higher collateral requirements (in loans for the purchase of housing) had a tightening effect on the terms and conditions of lending to individuals.

The factor that influenced the easing of credit terms and conditions for individuals was the increase in competition in the banking system. Regarding the tightening of credit terms and conditions for individuals, the perception of risk was reported.

The approval rate of loans to individuals was reported to increase in the second quarter of 2024. The lower ratio of rejected loans in this quarter was driven by almost all indicators related to the solvency of borrowers, with the policy framework of banks, as well as with credit history. The only factor that affected them in the opposite direction was the reported lack of documentation at the time of applying for loans by individuals.

Individuals' demand for loans was perceived to be higher in the second quarter, mainly for the purpose of purchasing housing. 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. In the opposite direction, the general level of interest rates, the use of alternative sources of financing, consumer confidence and current and expected developments in the housing market influenced them.


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