Senior Loan Officer Survey—Second Quarter of 2019

Results of the Second-Quarter Survey | Vol. 12.2 | June 28, 2019

This Senior Loan Officer Survey (SLOS) focused on changes to lending practices in the second quarter of 2019. The survey was conducted between May 6 and May 31, 2019.

Household lending conditions

  • Mortgage lending conditions eased in the second quarter of 2019, while non-mortgage lending conditions remained mostly unchanged (Chart 1).1
  • Easing in mortgage lending conditions mainly took the form of price easing (Chart 2).2
  • A mixture of competition and business strategy led to price easing for both high- and low-ratio mortgages. This was partially offset by some tightening in price conditions for home equity lines of credit.
  • Non-price mortgage lending conditions generally remained unchanged, except for some easing for high-ratio mortgages.
  • Consistent with recent housing market dynamics, demand for mortgage lending declined in British Columbia but increased in Quebec. Factors driving changes in demand in these provinces include interest rates, economic and labour market conditions, and consumer confidence. Overall, demand for mortgage lending remained unchanged at the national level.
  • Non-mortgage price conditions tightened, driven by other consumer lending.3 Non-price lending conditions remained unchanged (Chart 3).
  • Demand for non-mortgage lending was also unchanged.

Chart 1: Mortgage lending conditions eased, while non-mortgage lending conditions were mostly unchanged

* The balance of opinion is calculated as the weighted percentage of surveyed financial institutions reporting tightened credit conditions minus the weighted percentage reporting eased credit conditions. Thus, a positive balance of opinion implies a net tightening.

Note: Each series shows the average of the balances of opinion for the price and non-price dimensions of lending conditions for each category of lending.

Last observation:

Chart 2: Easing in mortgage lending conditions mainly took the form of price easing

* The balance of opinion is calculated as the weighted percentage of surveyed financial institutions reporting tightened credit conditions minus the weighted percentage reporting eased credit conditions.

Note: Each series is the simple average of the balances of opinion for high-ratio mortgages, low-ratio mortgages and home equity lines of credit.

Last observation:

Chart 3: Price conditions tightened for other consumer lending, while non-price conditions were unchanged

* The balance of opinion is calculated as the weighted percentage of surveyed financial institutions reporting tightened credit conditions minus the weighted percentage reporting eased credit conditions.

Note: Each series is the simple average of the balances of opinion for auto loans and other consumer lending. Last observation:

Business lending conditions

  • Overall business lending conditions eased slightly in the second quarter of 2019 (Chart 4) in terms of both price and non-price conditions (Chart 5).
  • For corporate borrowers, competition continues to be the driving force behind easing.4 The balance of opinion has increased since the fourth quarter of 2018 and remains at about the same level as it was in the first quarter of 2019.
  • For small business and commercial borrowers, concerns about the economic outlook in the Prairies have led to a tightening of lending conditions in that region for the second consecutive quarter. Outside the Prairies, lending conditions for small businesses (mainly non-price conditions) eased slightly.
  • Overall, business demand at the national level was mostly unchanged. Some weakness was reported, however, in British Columbia and the Prairies. Respondents pointed to softening business sentiment, a slowing in BC real estate construction and uncertainty in the oil sector as the main factors driving decreased commercial and small business demand in those regions. Demand from businesses in the rest of the country remained unchanged in the second quarter of 2019.
  • Access to capital markets increased for all risk grades of borrower. One respondent characterized the increased access for non-investment grade borrowers as a return to solid access after the decrease in the previous quarter.

Chart 4: Overall business lending conditions eased slightly in the second quarter of 2019

* The balance of opinion is calculated as the weighted percentage of surveyed financial institutions reporting tightened credit conditions minus the weighted percentage reporting eased credit conditions. Thus, a positive balance of opinion implies a net tightening.

Note: The chart shows the average of the balances of opinion for the price and non-price dimensions of lending conditions. Last observation:

Chart 5: Price and non-price lending conditions eased slightly

* The balance of opinion is calculated as the weighted percentage of surveyed financial institutions reporting tightened credit conditions minus the weighted percentage reporting eased credit conditions.

Note: Each series is the simple average of the balances of opinion for the small business, commercial and corporate sectors. Last observation:


Endnotes

  1. 1. The balance of opinion suggests only the direction of the net change in lending conditions. It does not provide information on the magnitude of the change.[]
  2. 2. The pricing of credit is defined as spreads over base rates rather than as the level of rates. Non-price conditions include terms of credit (collateral, covenants, etc.), general standards and capital allocation limits.[]
  3. 3. The survey separates household lending into five categories: high-ratio mortgages, low-ratio mortgages, home equity lines of credit, auto loans and all other consumer lending (i.e., all lending not included in the previous four categories).[]
  4. 4. Corporate, commercial and small business borrowers are differentiated by the size of the loans authorized. See Box 2 in U. Faruqui, P. Gilbert and W. Kei, “The Bank of Canada’s Senior Loan Officer Survey” (Ottawa: Bank of Canada 2011).[]