Eurozone mortgage borrowing increased last month after nearly two years of a slump, a sign that bank lending across the region may be coming back to life.
According to data released by the European Central Bank, mortgage lending for home purchases grew 3.4 percent last month, the fastest pace since September 2008. The acceleration was attributed to consumer confidence growth and the increase of the bank’s willingness to boost economic recovery by giving loans to the private sector.
Before the global financial crisis erupted in 2008, the housing market in many eurozone countries was overheating. The collapse of the housing market in countries like Ireland and Spain, and the less dramatic economic slowdown in France have intensified the economic burden across Europe. However, some of the largest countries in the eurozone, in terms of economy, like Spain, Italy and France have seen a clear sign of recovery in mortgage lending for home purchases since late 2009.
In contrast, eurozone bank lending to businesses contracted last month, at 1.9 percent annual rate which was slower than the 2.1 percent contraction rate seen in May.
Jean-Claude Trichet, president of the European Central Bank (ECB), said this month that, “a lagged response of loans to non-financial corporations to developments in economic activity is a normal feature of the business cycle.”
The pick-up in the housing market was driven by the exceptional measures that have been implemented to counter the economic crisis, said Julian Callow, an economist at Barclays Capital. “The action of the ECB is really helping to keep down mortgage rates. It ought to be followed by an improvement in corporate lending activity,” she said.