Italian bank lending expands at fastest pace since 2022, mortgage rates edge higher
Lending to Italian households and firms grew 3% year-on-year in May, the fastest since November 2022, even as average mortgage rates ticked up to 3.49%.
Lending accelerates
Total loans to households and non-financial businesses rose 3% year-on-year in May, up from +2.9% in April, according to the Italian Banking Association (ABI) monthly report. The expansion, which began in March 2025, marked the seventeenth straight month of growth for household lending (+2.6%) and the eleventh for business loans (+3.1%). The overall loan stock remains on an upward trajectory not seen this strong since late 2022. Governor of the Bank of Italy Fabio Panetta acknowledged the upturn but tempered expectations, noting that loan dynamics remain contained. He also highlighted that public guarantees back more than one-fifth of business loans, triple the share in other major euro-area countries.
In recent months, business lending has returned to growth, though the dynamic remains contained.
Interest rate picture
The average rate on total outstanding loans held at 4.04%, unchanged from April and at the highest level since May 2025. New business loan rates fell to 3.51% from 3.56% in April, down sharply from 5.45% in December 2023. New mortgage rates, however, rose two basis points to 3.49%, the highest since June 2024, when ECB policy rates were nearly double current levels. The ECB raised its key rate to 2.25% on 11 June, a move ABI deputy director general Gianfranco Torriero said largely ratified market moves, with Euribor already up 34 basis points since February.
- Total outstanding loans
- 4.04 %
- New business loans
- 3.51 %
- New mortgages
- 3.49 %
Deposits and funding
Deposits hit a record €1,890 billion in May, up 2.3% annually, while direct funding (deposits plus bonds) rose 2.6%. Indirect funding, or securities held at banks, grew by €100.4 billion between April 2025 and April 2026. The rate on new fixed-term deposits reached 2.22%, above the euro-area average of 1.97%. Net non-performing loans fell to €25.9 billion in April from €27.7 billion in December 2025, a fraction of the €196.3 billion peak in 2015.
Geopolitical backdrop and outlook
The credit expansion comes despite the war with Iran, which Torriero said has not derailed lending. He noted that the interim peace accord has helped push the 10-year IRS rate below 3%, while one-year inflation expectations have dropped from 4.5% to 2.6%. The ECB will assess these signals when deciding on further rate moves.
We should see a gradual reduction from the peak levels recorded in May. If a peace situation is maintained, general conditions will feel the positive effects.
