Tighter credit standards and decline in loan demand

In Danmarks Nationalbank's lending survey for the first quarter of 2023, the credit managers in 8 out of the 15 banks report that they have tightened the credit standards for private customers. The tightening is happening at the same time as a large part of the banks are experiencing lower demand for loans from existing private customers. It is still the slowdown in the number of housing transactions that the banks refer to as the primarily reason for the lower demand in the 1st quarter.

Banks have tightened their credit standards and notice lower loan demand from private customers
Note: In the lending survey, private customers cover 'Employees, pensioners, etc.' The figure shows the number of banks which have tightened credit standards and/or experienced lower loan demand from Q4 2022 to Q1 2023.

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Increasing requirements for income after expenses

Several of the banks, which tightened their credit standards for private customers in the second half of
2022, explained the tightening by saying that they raised their requirements for the minimum income after taxes and fixed expenses. It continues to be a theme, as several banks have raised those requirements in the 1st quarter of 2023. In the past year, all banks surveyed have taken measures which have meant tighter credit standards.

Overall, however, the banks currently expect that the tightening measures in the past year will be sufficient. Only a few banks expect to tighten the credit standards in the 2nd quarter of 2023 for private customers.

Different expectations for demand in 2nd quarter

While approximately half of the banks have experienced falling loan demand from existing private customers in the 1st quarter of 2023, the majority of the banks do not expect a decrease in loan demand in the 2nd quarter. Approximately one third of the banks expect a decrease in loan demand from existing private customers compared to the 1st quarter, while a few banks expect loan demand to increase.

Some of the banks, which expect unchanged or increasing demand, justify the answer with higher consumer costs and interest rate increases on customers' loans. This may mean that customers may need
to take out loans to pay for their higher expenses if the budget becomes too tight. Increased loan demand is thus not necessarily an expression of expectations for higher activity in the number of housing
transactions and other investments.