In 2022, real estate loans to households increased by €2.019bn. This increase does not foreshadow what will happen in 2023. Photo: Matic Zorman/Masion Moderne/Archives

In 2022, real estate loans to households increased by €2.019bn. This increase does not foreshadow what will happen in 2023. Photo: Matic Zorman/Masion Moderne/Archives

The effects of interest rate hikes are only beginning to be felt, as data from Luxembourg’s central bank (BCL) showed increased real estate loan activity last year despite banks slowing down their lending activity.

The latest figures from regulator CSSF concerning the direction of lending activities of Luxembourg’s financial institutions may seem counter-intuitive in relation to what can be seen on the ground--banks are more cautious and require much more collateral for a mortgage loan. But the fact remains: in 2022, real estate loans to households increased by €2.019bn (an annual increase of 5.1%).

It’s a progression that cannot be used as an indicator for what will happen in 2023: the increase in European Central Bank (ECB) rates that began in the second quarter--; and and +0.50% in December--and its impact on the Luxembourg market are only just beginning to be felt. Figures for the first quarter of 2023 must be awaited to see how the volume of loans granted has evolved.

Cold snap in December

In 2022, loans to non-bank customers--a category that includes not only real estate loans to households, but also loans to non-financial companies (NFCs) and loans to other financial intermediaries (OFIs, a sub-category that includes money market and non-money market funds)--increased by 7%, or €7.538bn.

But from November to December, the BCL noted a fall of 1.3%, or €1.562bn, carried by a strong decline in loans to OFIs.

Deposits from non-banking customers also fell sharply. Over twelve months, these deposits fell by €2.995bn (-1%). And in December alone, the decline reached €23.232bn. Household deposits increased by €190m (+0.4%).

The total balance sheet of the credit institutions amounted to €938.189bn. In comparison with the previous year, the balance sheet total decreased by 1.63%.

This story was first published in French on . It has been translated and edited for Delano.