FRANKFURT, Jan 23 Reuters Euro zone banks expect a small rebound in the demand for mortgages and corporate loans for the first time in two years as a slump in lending shows early signs of moderating, a European Central Bank survey showed on Tuesday.

The results of the quarterly Bank Lending Survey are likely to strengthen the ECB39;s view that the most brutal increase in interest rates in the euro39;s history has now been fully passed on to the real economy and lenders are beginning to anticipate a recovery.

The poll showed lenders continued to tighten access to credit in the last quarter of 2023 but fewer banks did so than at any point in the previous two years and than banks themselves had expected three months earlier.

Among the euro zone39;s four largest economies Germany, France, Italy and Spain none saw a net tightening in credit standards for mortgages and only Germany witnessed it for corporate loans.

While banks expect to raise the bar for extending loans this quarter, they also see a small net increase in the demand for corporate credit and for mortgages for the first time since early 2022, the ECB said.

That39;s what the start of a gradual recovery looks like, Dirk Schumacher, an economist at Natixis, said. Standards aren39;t getting tighter and demand is not shrinking as fast.

Furthermore, while terms and conditions tightened further on consumer credit, they eased for housing loans, the survey showed.

In corporate loans, there was almost no net…