Credit Growth on the Brake: August Brought Strong Slowdown in Borrowing

Household lending significantly slowed down in August. According to data from the Croatian National Bank, total loans to households increased in August by €114.6 million, measured by transactions (newly approved loans reduced by repayments of existing loans and partly by portfolio sales). This is the weakest monthly growth in loans to households since the end of 2023.

In comparison, net transactions in July amounted to €327.9 million, and in June even €437.8 million, which means that the monthly growth in lending in August was almost three times weaker than in July.

The largest part of the August growth still consists of housing loans, with net transactions of €75.9 million, while cash non-purpose loans increased by only €22.6 million, measured by transactions.

This is significantly less than the usual monthly growth this year: in the first six months, the average cash loan growth was around €120 million, and growth exceeded €100 million in all months except January and July. In the latter, a slight decline in the total balance was recorded in August (-€1 million), which further confirms the slowdown in consumer lending.

Growth was also recorded in auto loans and overdrafts, while credit card loans slightly decreased. Overall, the balance of loans to households at the end of August amounted to €26.54 billion, representing a monthly growth of 0.4 percent.

The mentioned slowdown is a result of the seasonal effect of the summer months and the macroprudential measures of the Croatian National Bank that came into effect in the middle of the year. The tightened lending conditions already slowed down the growth of cash loans in July, and it is now evident that the spillover effect is also affecting the housing segment.

Given the strong growth of loans in the previous two years, the August data could mark a turning point in the trend. Whether the slowdown will continue and what the effects of the Croatian National Bank’s tightened conditions on credit activity will be will be shown in September, when banks traditionally record a recovery in demand after the summer break.