Banks see strict lending for commercial real estate
Banks see strict credit rules for commercial real estate loans in the fourth quarter of the year, but easing for individual borrowers, according to the Bangko Sentral ng Pilipinas (BSP).
The central bank said responses from lenders in its survey of top bank loan officers (SLOS) in the third quarter of 2021 continued to signal anticipation of a net tightening in credit requirements for commercial real estate loans (CREL). from October to December of this year after the adoption of the Diffusion Index (DI) is approaching.
On the other hand, banks have reported a marked increase in demand for CREL, due to “improved economic prospects for customers and lower interest rates”.
At the same time, the DI-based approach foresees a marked easing of credit criteria for home loans, due to expected improvements in borrower profiles and improved economic prospects.
Responses to the survey also “indicated expectations of a net increase in demand for home loans in the fourth quarter (fourth quarter) of 2021 in anticipation of more attractive financing conditions for banks, lower mortgage rates. consumer interest and increased real estate investment.
The results of the survey showed that banks tightened their loan terms for CRELs for the 23rd consecutive quarter from July to September 2021.
“Banks surveyed cited a decrease in risk tolerance, a deterioration in borrower profile and a more uncertain economic outlook as important factors in the tightening of overall credit standards for CRELs in the third quarter of 2021,” BSP said.
Wider loan margins, smaller line of credit amounts, tighter collateral requirements and loan covenants, increased use of interest rate caps and shorter loan maturities were all cited. as reasons for the net tightening of global lending standards for CRELs.
Bangko Sentral added that data based on DI showed a sharp tightening in the third quarter of 2021 for mortgage loans to households.
The central bank said it has been running SLOS since 2009 to better understand banks’ lending behavior, which is a key indicator of the country’s lending activity.