Banks in Bulgaria tighten lending conditions

Since the beginning of the year, banks in Bulgaria have been tightening the conditions for long-term loans to large enterprises, as well as consumer and housing loans to households. This shows the traditional survey of the Bulgarian National Bank conducted among the banks in Bulgaria regarding their lending activity.

Its results show that banks maintain their standards for lending to small and medium-sized enterprises without significant change.

The main influence on the tightening of banks' lending standards and conditions for large corporate loans has been the cost of borrowing resources. In the case of consumer and housing loans, respectively, increased risk assessment due to the macroeconomic environment.

Credit standards and conditions typically include both interest rates and various fees and charges, as well as loan size, drawdown terms, collateral, etc.

BNB statistics show that the volume of housing and consumer loans continues to grow strongly, while business loans are slowing down.

The main driver of demand for corporate loans continues to be the need for financial resources for working capital and inventories. The need for funds to purchase current and durable goods is a factor in the demand for consumer credit.

Households' needs for funds to purchase first and additional homes, as well as still low interest rates, are major contributors to the demand for home loans. In addition to interest rates, the high growth in housing loans is also influenced by households' continued preference for purchasing real estate as an alternative form of savings or investment, as well as higher house prices, which are driving the increase in the volume of new housing loans.

However, the Central Bank forecasts that the rise in interest rates in Bulgaria will continue and thus the financing conditions for businesses and households will deteriorate, as will those for government financing.