Eurozone to see lending pick-up after long slump

MORTGAGE lending is predicted to hit an all-time high in the Eurozone this year, while business lending will grow for the first time in four years, according to forecasts from EY.

The accountancy firm says the bloc’s recovery, combined with lower energy prices, will mean this year is a turning point after a decade-long lending slump.

EY’s Eurozone Forecast for Financial Services (EFFS) predicts that business lending, which has fallen by €551bn (£400bn) since 2008, will increase by €53bn this year and €184bn next year, but won’t hit 2008 levels until 2018.

Meanwhile mortgage lending will reach a historic high of €3,930bn this year, says the report.

Andy Baldwin, financial services leader for Europe, the Middle East, India and Africa (EMEIA) at EY said: “It’s taken six years to create the conditions to kick-start growth in the Eurozone, but all the levers you can pull to stimulate demand have now been pulled, and there’s the additional stimulus of lower energy prices. So, if we don’t see growth in 2015 and 2016, we’ll have to conclude there are much more fundamental supply side issues to tackle.

“However, the European Central Banks’s quantitative easing programme cannot take the credit for the improved outlook in lending, which is much more closely linked to cheap energy prices. And QE is a double edged sword.

“Investment banks and asset managers will benefit in the short term, but retail banks will find their profit margins squeezed, and insurers are facing an extra two years at least of punishingly low interest rates.”

The report said growth in business lending of 1.2 per cent in 2015 will be carried by growth of 3.5 per cent in Germany, 2.4 per cent in The Netherlands and two per cent in France. But growth of 4.3 per cent is predicted for next year to reflect recovery in the periphery as well.

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