FRANKFURT, July 16 Reuters Euro zone households are applying for loans in growing numbers for the first time in two years as they grow more optimistic about the economy and interest rates fall, a European Central Bank survey showed on Tuesday.

The ECB began cutting interest rates in June but borrowing costs on financial markets started falling well before then, slowly making credit more attractive.

A net 16 of lenders polled in the ECB39;s Bank Lending Survey BLS reported an increase in demand for loans from households in the three months to June, the first such increase since 2022, and respondents expect this trend to continue this quarter.

Improving housing market prospects, cited primarily by German banks, were the main driver of the increase in housing loan demand, the ECB said. The general level of interest rates and consumer confidence had a smaller positive impact.

The ECB is expected to keep rates on hold this week but two more cuts are priced in by the end of this year.

Similarly, banks eased conditions on mortgages for a second consecutive quarters due to stronger competition although they tightened access to consumer credit because of growing perceived risk.

On the flipside, conditions on corporate loans continued to tighten, even if only modestly, and demand for them declined.

The tightening was relatively large for companies in commercial real estate CRE, in line with the ECB39;s own policy as the euro zone39;s bank supervisor.

In the second half…