The key chart
The key message
Mortgage flows slow as EA demand shifts to more COCO-based borrowing
The Euro Area (EA) money sector is sending a clear message of a slowdown in the mortgage market at the start of 4Q22. Monthly mortgage flows have fallen for four consecutive months from a recent high of €30bn in July 2022 to €8bn in October 2022, the lowest monthly flow since April 2020 (€7bn) at the height of the COVID-19 pandemic (see chart above). The YoY growth rate has also slowed from its August 2021 peak of 5.8% to 4.8% in October 2022, the slowest YoY growth rate since February 2021 (4.5%).
The silver lining here is that the slowdown in mortgage demand is part of a recent structural shift away from less-productive FIRE-based lending (of which mortgages are the largest part) back towards more productive COCO-based lending (of which corporate lending is the largest part).
A year ago (October 2021), mortgages and corporate lending accounted for 2.2ppt and 0.8ppt to total private sector credit growth of 3.3% YoY respectively. Last month (October 2022), their respective contributions were 1.9ppt and 3.2ppt to a higher total credit growth of 6.2% (see chart below).
and corporate credit (Source: ECB; CMMP)
Please note that the summary comments and charts here are abstracts from more detailed analysis that is available separately.